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backEUROtalk April, 2012

German business mood looks unfazed by European worries

Confidence among German business leaders has hit a nine-month high in April, a key survey shows. It appears that top industry brass is shrugging off the problems worrying the rest of the eurozone.

German business sentiment rose for the sixth straight month in April, the country's closely watched Ifo economic research institute reported Friday. The overall business climate index inched up to 109.9 points from 109.8 points in March.

The unexpected rise in confidence among the 7,000 German business leaders polled for the monthly survey indicated that Europe's largest economy continued to outpace peers on the continent.

"The German economy remains resilient," Ifo President Hans-Werner Sinn said in a statement.

German industry once again appeared willing to ignore the massive worries of many other eurozone member countries as the debt crisis in the area was far from over.

"The impact of the latest wave of the euro crisis on German business confidence remains negligible," said Christian Schulz of Berenberg Bank. "The fundamental strength of the German economy continues to outweigh external worries."

Flexible export strategy

The Ifo institute pointed out that recent market turbulence related to Spain and Italy had not yet been fully reflected in the April report, raising the prospect of a weakening in the months ahead.

But economists said even as the eurozone continued to struggle with public debt, demand for German goods from outside the common currency area, such as the United States and China, would drive export growth in the coming months.

A closer look at Ifo's April sub-indices revealed that the indicator's reflection of companies' current assessment was behind the slight increase in overall business confidence, while the gauge measuring business expectations in the moths ahead remained essentially unchanged.

Source: Deutsche Welle - GAI

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