German business optimism rose for sixth straight month in April; Ifo index rose to 109.9 from 109.8, surprising analysts, who had expected a slight decline

Cindy Allen

Cindy Allen

Apr 20, 2012 – Associated Press

BERLIN , April 20, 2012 () – German business optimism rose for a sixth straight month in April, according to a closely watched survey showing Europe's largest economy remains resilient to the continent's troubles over too much debt in some countries.

The Ifo institute business climate index published Friday edged up to 109.9 points from 109.8 the month before, beating market expectations for a slight decline.

Germany's economic prospects are looking up after the country went through a slow patch over the winter. The economy shrank 0.2 percent in the fourth quarter, but leading economic institutes this week raised their forecast for 2012 to 0.9 percent from a 0.8 percent prediction last fall.

Both parts of the index — estimates of current conditions and expectations for the next six months — were up. Sentiment rose among both indutrial firms, which are often oriented toward exports in Germany, and retailers, which depend on domestic demand. Economists say Germany's low unemployment rate of 5.7 percent is giving workers the confidence they need to spend money in stores.

"The Germany economy is showing itself to be robust," said Ifo institute head Hans-Werner Sinn.

Those conditions defy the worsening fears about the eurozone debt crisis. Spain and Italy are seeing higher costs to borrow money on bond markets and roll over their debt loads, while their economic growth is sagging.

Germany appears to be easily outpacing the eurozone as a whole, which is expected to see its economy shrink 0.3 percent this year according to the European Union's executive commission.

High borrowing costs and fears of default have already pushed Greece, Ireland and Portugal to seek bailout loans from other eurozone countries and Greece had to ask creditors to write down €107 billion in debt that it could not pay.

The Ifo survey rose despite declines in hard data such as orders received by German manufacturers, which usually weigh on the business climate, Commerzbank chief economist Joerg Kraemer wrote in a note to investors headlined "Ifo defies gravity."

He said the survey supports the view that Germany posted a slight expansion of 0.1 percent in the first quarter and thereby escaped a technical recession. Two straight quarters of shrinking output are one definition of recession. Growth figures for the first three months of the year are due out May 15.

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