Germany’s business community is shrugging off the eurozone debt crisis, with a survey of industry optimism rising unexpectedly for a second consecutive month.

The surprise rise in Munich-based Ifo institute’s business climate index for December, released on Tuesday, indicates the eurozone crisis has so far left Europe’s largest economy

relatively unscathed. It suggests the steady falls in German unemployment and sanguine consumers are instead boosting prospects for the country’s corporate sector.

Germany’s optimism contrasts with an increasingly bleak outlook across much of the rest of the eurozone. The European Central Bank will on Wednesday reveal how much demand from banks there was for its first ever offer of unlimited three year loans – a move intended to prevent a “credit crunch” driving the eurozone into a deep recession.

Analysts reckon the total could exceed €200bn. The ECB expects the eurozone to fall into recession this winter – defined as two consecutive quarters of contraction – and has warned of “substantial” downside growth risks.

The latest Ifo rise was “like a winter fairy story”, said Andreas Scheuerle, economist at Deka bank in Frankfurt. “It’s the story of a large economy at the heart of Europe that keeps on getting better, unaffected by the debt crisis and the problems of its neighbours. Whether this remains true is not yet a foregone conclusion.”

Germany’s economy is expected to slow significantly in coming months, as a result of weaker global demand for its products. Earlier this week, however, the Bundesbank predicted a return to solid growth “in the course of next year”, supported by the ECB’s expansionary monetary policy. The German central bank expected the country’s economy to expand by 1.8 per cent in 2013, after 0.6 per cent next year and 3 per cent this year.

Separately on Tuesday, the Nuremberg-based GfK research group reported German consumers’ expectations about the economic outlook also brightened this month. “With most German companies operating at above-average capacity, the labour market is very robust and unemployment figures continue to fall,” it noted in a statement.

As a result, consumers expect incomes to rise next year, GfK said. Its overall “consumer climate” index is expected to remain steady in January. Consumer spending may thus play “the vital role of ensuring that Germany avoids going into recession,” the company added.

The Ifo business climate index, regarded as a forward-looking indicator of growth trends, rose from 106.6 in November to 107.2 in December – the highest reading since September and significantly above levels seen during the 2009 economic downturn.

The latest increase was the result of businesses becoming more optimistic about their prospects for the next six months. The component of the index covering their assessment of current business conditions was unchanged from November.

Alexander Koch, economist at UniCredit in Munich, said the improvement was driven by gains in sectors such as construction and retailing. The robustness of German domestic demand meant “a temporary and limited correction in foreign demand, which is our baseline scenario, would not leave deep scars”.

Courtesy Google News

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