German data points to growing euro zone divide
BERLIN (Reuters) - Three surveys this week are expected to confirm Germany's economy is rebounding from a dismal end to 2012, widening its advantage over the euro zone's struggling southern states and neighbouring France.
Europe's largest economy held up strongly during the first 2-1/2 years of a debt crisis that has hammered growth across the bloc, before contracting in the last quarter of 2012 as firms postponed investment and exports suffered.
Economists expect a moderate return to growth in the first quarter of 2013 that is crucial if the wider euro zone economy is going to recover.
"There is a lot of momentum in the confidence rebound in Germany, the unemployment rate remains low and wages are rising," said Berenberg Bank analyst Christian Schulz.
"Financial markets have been stable too and borrowing costs are very low and are reasons to support the momentum."
The Ifo business climate index, a key barometer of Germany's economic health due out on Friday, is seen rising for the fifth consecutive month to 107.6 from 107.4, according to a Reuters poll of 37 economists.
German investor and analyst sentiment, published by the Mannheim-based ZEW institute on Tuesday, is seen remaining near its highest level in almost three years, albeit easing slightly to 48.0 from 48.2, possibly due to the uncertain outcome of Italy's elections last month.
But the "hard" data of backward-looking statistics on production, sales and jobs has been mixed, a sign the economy will not rebound as strongly as the sentiment measures suggest from a 0.6 percent contraction in the fourth quarter.
Unemployment, which is already near a post-reunification record low, is falling but industrial output appears to have stalled while orders have fallen.
The Bundesbank, which has said it expected the economy to stagnate in the first quarter, stuck with its forecast on Monday for growth of 0.4 percent this year, in contrast to moves by two think tanks to double their forecasts last year.
"The hesitant start to the year 2013 does not put into question the prospect of a pick-up of economic activity," the central bank said.
Starting with a far lower debt burden, and far lower borrowing costs, Germany has been able to ride out the debt crisis without making the kind of swingeing cuts that have crippled the Greek, Spanish or Portuguese economies.
Its much-praised industrial consensus has also allowed companies to adjust to the downturn by reducing man-hours without laying off huge numbers of workers and hammering the confidence of households to spend.
Markit's purchasing managers indices (PMI), due out on Thursday, are expected to show both the services and manufacturing sectors expanding marginally. These make up more than two-thirds of the German economy.
That contrasts starkly with France, burdened by the failure to reform industrial relations as it battles to compete with Germany and others in emerging markets like China, Russia and India which have become the main drivers of world growth.
Markit's headline figures show the gap between the two countries is the largest since the euro was launched in 1999.
Schulz said that gap would continue to grow unless Paris embraced reforms to regain competitiveness, underlined by its failure to meet targets for reducing government borrowing.
"Germany has a balanced budget while France is overshooting, which means that at some point austerity will have to hit in the latter and will weigh further on growth," he said.
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