AP News, November 27th, 2007
Business confidence in Germany rose in November for the first time since April, a closely watched survey showed Tuesday — defying analyst expectations for Europe's largest economy.
Separately, the government estimated Germany's annual inflation rose to 3 percent this month — its highest level in more than 13 years — due to high prices for oil products, food and beverages.
Data from Germany are important to interest rate decisions by the European Central Bank, which has kept open the possibility of raising its rates even as the U.S. Federal Reserve cuts the cost of borrowing.
Germany's Ifo institute said its business climate index rose slightly to 104.2 from 103.9 in October, after slipping for six straight months. Economists surveyed by Dow Jones Newswires had expected another decline to 103.4.
Companies assessed their current situation more positively than in October, but were "somewhat more cautious" regarding the six-month business outlook, Ifo President Hans-Werner Sinn said.
"The results indicate that the currently strong economy is only gradually cooling," Sinn said.
Still, economists warned against reading too much into the report.
"The slight recovery in Germany's Ifo index in November is nothing more than a false dawn ... The trend of euro-zone business confidence is definitely still heading lower," David Brown, chief European economist at Bear Stearns, told Dow Jones Newswires.
"Economic confidence continues to soften and growth momentum is slowing. The financial market crisis is far from over, the credit crunch is hitting home hard, oil prices remain high and the strong euro continues to hurt business confidence," he said.
The 13-nation euro spiked as high as $1.4908 on Tuesday — approaching its all-time high of $1.4966, set on Friday.
Ifo's index measuring current economic conditions in Germany rose to 110.4 in November from 109.6 in October. The index measuring firms' business expectations for the next six months fell to 98.3 from 98.6.
The business climate indicator rose in the manufacturing sector, where Ifo said the current situation was assessed "clearly more positively," but the climate in the construction industry worsened slightly. The climate in wholesaling, after a clear downturn in the previous month, improved slightly but the retailing business climate worsened.
Ifo's monthly index is based on a survey of some 7,000 managers across various sectors.
The 3 percent annual inflation estimate Tuesday by the Federal Statistics Office was up from 2.4 percent in October.
The estimate was based on data from six of Germany's 16 states.
Inflation last hit 3 percent in February 1994, the office said in a statement. Compared with the previous month, prices were up 0.4 percent in November.
The statistics office said that heating oil prices were up as much as 25.9 percent on the year, while fuel prices were up to 20 percent higher. Excluding heating oil and fuel, it said, annual inflation would have been a more modest 2.1 percent.
Analysts surveyed by Dow Jones Newswires had predicted a November inflation rate of 2.7 percent.
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On the Net:
http://www.ifo.de
