German Business Confidence Exceeds Expectations
World Economy

German Business Confidence Exceeds Expectations

Business confidence in Germany rose again to kick off the New Year, a widely watched survey showed Monday.
The Ifo Institute’s monthly indicator of business confidence increased to 106.7 in January from 105.5 in December, exceeding the 106.5 expected by analysts in a Wall Street Journal survey. It was the third consecutive monthly increase for the index, Dow Johns reported.
The data suggest growing economic momentum in Europe’s largest economy.
Ifo President Hans-Werner Sinn said in a news release that German manufacturers expect to profit from a weaker euro. “The German economy makes a good start to the year,” he said.
Economists see the weaker euro, which makes exports cheaper, as one of a number of factors pushing German growth forward this year. “The German economy should enjoy a pleasant tailwind, stemming from lower energy prices, the weaker euro and rock-bottom interest rates,” said ING economist Carsten Brzeski in a research note.
The survey’s assessment of the German economy’s current conditions increased by nearly 2 points to 111.7 in January, “signaling a strong pace of expansion at the start of 2015,” said Berenberg economist Christian Schulz.

  Risks Persist
Still, he said that the survey result revealed some risks to the outlook. He noted that the component measuring expectations rose only by 0.7 points to 102.0. He said this underpins “short-term caution for Germany’s economy” until the ramifications of Greece’s election are played out and “the benefits of cheap oil to the global economy become clearly visible in higher demand at home and abroad.”
The figures come after Germany’s statistics office said earlier this month that the economy grew by 1.5% last year, its strongest growth pace since 2011. The economy also grew by about one quarter of a percentage point in the final quarter of 2014 versus the previous three months, the statistics office said in an early estimate.
Experts say that in general Germany should benefit from a weaker euro, as this should support demand for export goods while lower oil prices give consumers at home more money to spend.

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