German business confidence jumps to 7-month high (Roundup)

Berlin - German business confidence jumped more than forecast in June, a key survey released Monday said, amid hopes that the global recession is loosening its grip on Europe's biggest economy. The Munich-based Ifo economic research institute said its closely watched index rose to 85.9 from 84.3 in May, for its third straight monthly gain. Analysts had predicted a rise to 85 points. 'The survey results confirm that the German economy is gradually stabilising,' said Ifo president Hans-Werner Sinn in releasing the survey. Based on a survey of 7,000 German executives, the index slumped to a 26-year-low in March as concerns frew about the fallout from the steep global economic downturn. The index now stands at its highest level in seven months. But while Ifo's June rise was powered by a big increase in expectations of business conditions six months down the track, the rise in the overall index was slowed by the cautious appraisal of German boardrooms of the current business conditions. Ifo index's indicator measuring business expectations jumped for the sixth month in a row from 86 points in May to 89.5 in June. However, the index's component gauging current business conditions slipped to 82.4 points this month from 82.5 in May. 'The worst should be over but the ongoing improvement is likely to be too weak to seriously discuss a recovery,' said ING Bank economist Carsten Brzeski. In line with other key forward-looking European economic sentiment indicators, the Ifo has gained ground on hopes that a string of big government fiscal stimulus packages around the world and hefty global interest rate cuts would help pave the way for an economic pickup going into 2010. German investor confidence jumped to a three-year high in June, a key indicator released last week showed. The Mannheim-based Centre for European Economic Research (ZEW) said its index measuring the mood among analysts and institutional investors posted its eighth consecutive monthly rise, climbing to a more-than-forecast 44.8 points in June. But the improvement in long-term economic sentiment surveys also comes despite the recent publication of a steady stream of bleak economic data with German exports, industrial production and factory orders falling sharply as a result of the nation's biggest slump in more than 60 years. 'When the hard economic indicators such as order books also trend upwards, then the contraction in the German economy can come to an end in the second half,' said Joerg Kraemer, economist with Germany's Commerzbank. In its latest monthly report released Monday, Germany's influential central bank the Bundesbank warned against hopes of an early pick up in economic growth. The Bundesbank said that signs of a recovery in foreign demand still remained weak, while domestic demand was suffering was from a decline in investment. In the meantime, the German economy is forecast to shrink by 6 per cent or more this year with growth in particular dragged down by exports as a steep fall in global trade undercuts foreign orders for the world's biggest exporting nation. Monday's Ifo index will also set the stage for the release in the coming days of new round of monthly sentiment surveys. This includes German and French consumer confidence reports as well as key European purchases managers' reports along with business sentiment indicator for Belgium, which is considered to be a bellwether survey for the 16-member eurozone.