German Business Sentiment Likely Rose for Fourth Month in July
German business confidence probably rose for a fourth month in July, suggesting Europe’s largest economy is shaking off its worst recession since World War II.
The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, increased to 86.5 from 85.9 in June, according to the median of 32 forecasts in a Bloomberg News survey. The index reached a 26-year low of 82.2 in March. Ifo releases the report at 10 a.m. today.
The German economy may return to growth this quarter as a global recovery boosts exports and government measures to stimulate domestic spending kick in. Manufacturing orders rose for a third month in May and industrial production surged the most in almost 16 years. The Bundesbank said July 20 that the economy shrank “only slightly” in the second quarter after its record 3.8 percent contraction in the first.
“Improving sentiment and rebounding orders suggest things will go up from here,” said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. “While there won’t be a soaring recovery, we’re optimistic that we’ll see positive data for the rest of the year.”
That may provide a boost for Chancellor Angela Merkel, who will seek a second term in office in national elections in September. Her coalition government is spending about 85 billion euros ($121 billion) to revive the economy, which it predicts will contract 6 percent this year.
‘Rocky Road’
Executives’ assessment of the current situation as well as their expectations will improve, according to the survey of economists. Still, German investor confidence unexpectedly fell this month, the ZEW Center for European Economic Research said on July 14 life insurance quote.
“We still have a rocky road ahead of us and won’t reach cruising speed for some time,” said Mario Gruppe, an economist at NordLB in Hanover. “We’ll return to growth slowly. The recession has been too severe and its consequences will accompany us for several years.”
Economists at Allianz SE, Europe’s biggest insurer, this week forecast the German economy will expand 2.3 percent in both the third and fourth quarters before contracting again in the first three months of 2010.
Continental AG, the German car parts and tire manufacturer burdened with 11 billion euros of debt, on July 20 said it returned to profit in the three months through June after two quarters of losses by pursuing spending cuts.
Praktiker AG Chief Executive Officer Wolfgang Werner said July 22 that Germany’s second-largest home-improvement retailer made a “good start” to the third quarter.
Belgian business confidence rose for a fourth month in July, the central bank in Brussels said yesterday. In France, the euro area’s second-largest economy, confidence also climbed for a fourth month, Paris-based statistics office Insee said.
The European Central Bank has cut its benchmark interest rate to a record low of 1 percent, offered to lend banks as much cash as they need for up to 12 months and started buying covered bonds in a bid to unlock credit markets and restore growth in the 16-nation euro region.