recession fears fade for germany
Last Updated : GMT 23:57:33
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Recession fears fade for Germany

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Arab Today, arab today Recession fears fade for Germany

Krankfurt - AFP

Fears the eurozone\'s crippling debt crisis could push Germany into recession faded Wednesday as business confidence in Europe\'s bigggest economy rose for the third month in a row. The Ifo economic institute\'s closely watched business sentiment index beat analysts\' expectations to rise to 108.3 points in January from 107.3 points in December. The index \"improved for the third time in succession. Although companies assess the current business situation as less favourable than in December, their business expectations have brightened considerably,\" said Ifo president Hans-Werner Sinn. Ifo calculates its headline index on the basis of companies\' assessments of their current business and the outlook for the next six months. While the sub-index measuring current business declined to 116.3 points in January from 116.7 points in December, the outlook sub-index climbed to 100.9 points, its highest level since July 2011. Analysts had been expecting a much more modest increase in business confidence this month and so they saw the new data as a sign that Germany -- where growth shuddered to a halt in the last quarter of last year -- will successfully skirt a recession. The latest Ifo reading was \"not simply a coincidence, it signals a fundamental turning point in the business cycle,\" said UniCredit analyst Andreas Rees. \"Did anyone say recession? Today\'s Ifo index shows that the German economy only made a short stopover at the end of last year and is now heading towards expansion again,\" agreed ING senior economist Carsten Brzeski. Precise gross domestic product (GDP) data for the final quarter of 2011 are not yet available. But earlier this month, the national statistics office Destatis estimated that GDP shrank by \"around a quarter of a percentage point\" in the period from October to December as the eurozone debt crisis increasingly put the brakes on growth. Recession is technically defined as two consecutive quarters of negative growth. But with domestic demand now taking over as the engine of the traditionally export-oriented German economy, experts and the government are confident the lull in economic activity will prove only temporary. \"After the economy shifted down a gear in the winter, we\'re now seeing the first signals that this phase of weakness is already coming to an end,\" said economy minister Philipp Roesler. \"This confirms our forecast for 2012, which sees a slight upturn in the first half,\" the minister said. Other forward-looking indicators, such as the ZEW barometer of investor confidence and a widely-watched purchasing managers\' index, similarly point to the ongoing resilience of the German economy. Companies were better prepared to weather the current storms following the deep restructuring they had undertaken in recent years and Germany, as one of the world\'s biggest exporters, would be one of the main beneficiaries if the economic recovery in the United States proved to be sustainable, said ING\'s Brzeski. Furthermore, if the mild winter weather persisted enabling the construction sector to become an important growth driver, \"negative growth in the fourth quarter should have only been a blooper,\" the analyst argued. Christian Schulz, senior economist at Berenberg Bank, said that historically high employment levels as well as healthy public finances and company balance sheets were making Germany \"less dependent on the traditionally strong export sector.\" And while Germany \"cannot decouple the weakness of its most important export markets in the eurozone, resilient domestic demand can cushion the blow,\" he said. If the debt crisis did not deteriorate further, \"Germany and with it the eurozone overall can return to healthy growth in the second quarter, swiftly leaving a mild winter recession behind,\" Schulz said. Thomas Harjes of Barclays Capital Research said the Ifo data \"confirm our view that the contraction of economic activity at the end of last year was a one-quarter soft patch and, in contrast to several other economies in the euro area, we will likely see modest but positive German growth again this quarter.\"  

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