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German Business Sentiment rises slightly in June - Reuters

Posted by Chris Advincula on Jun 24, 2013 6:22:00 AM

BERLIN, June 24 (Reuters) - German business morale edged up for a second straight month in June in a sign that Europe's largest economy is slowly recovering after a contraction in late 2012 and a subdued start to 2013, as export expectations improved sharply.

The Munich-based Ifo think tank said on Monday its business climate index, based on a monthly survey of some 7,000 firms, climbed to 105.9 in June from 105.7 in May, bang in line with the consensus forecast in a Reuters poll of 40 economists.

While the German economy propped up growth in the euro zone during the early years of the region's debt crisis, it slowed last year and only just managed to return from the brink of recession in early 2013 thanks to household spending.

"It is a sign that regardless of possible strains on the sidelines, the German economy will be able to continue its growth in the summer as well," said Ralf Umlauf at Helaba.

Ifo economist Klaus Wohlrabe said he expected the economy to grow significantly more in the second quarter than in the first three months of 2013. The auto industry in particular was helping the business climate to improve, he said.

While the government expects foreign trade, traditionally the backbone of the economy, to weigh on growth this year, the Ifo survey showed export expectations picking up, suggesting shipments abroad may help Germany expand in the second half.

Companies were more pessimistic about current business but they were more upbeat about their business outlook, with an Ifo expectations sub-index rising to 102.5 from 101.6 in May.

"That points to a better third quarter than expected so far. It's a positive signal that the upswing could gather speed," said Christoph Weil, economist at Commerzbank.

The government expects growth to pick up in the second quarter, though recent data has painted a mixed picture, with foreign trade, output and investor sentiment improving but industrial orders dwindling and unemployment edging up.

But risks to business confidence remain, with Europe failing at the weekend to agree on how to share the cost of bank collapses and Greece's ruling coalition losing its smallest party, potentially making it harder to pass unpopular reforms.



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