(Adds market reaction, analyst comment)
BERLIN Jan 27 German corporate sentiment
unexpectedly rose for the first time in eight months in January,
suggesting interest rate cuts and billions of euros in fiscal
stimulus are boosting recovery hopes in Europe's largest
The Munich-based Ifo economic research institute said its
business climate index, based on a monthly poll of around 7,000
firms, rose to 83.0 in January from an upwardly revised 82.7 in
A Reuters poll of 50 economists had pointed to a reading of
81.3, with forecasts ranging from 79.0 to 83.5 ECONDE.
The euro jumped to its highest level in a week against the
dollar and Bund futures slipped after the data.
"Today's Ifo index shows that the aggressive German fiscal
answer to the worst recession since World War Two and the
ongoing monetary easing have possibly turned on the light at the
end of the tunnel," said Carsten Brzeski at ING Financial
Earlier on Tuesday, Chancellor Angela Merkel's cabinet
approved a record 50 billion euro ($65.72 billion) stimulus
In other positive news from the corporate sector, German
industrial conglomerate Siemens (SIEGn.DE) stuck to its outlook
after its 2009 fiscal year started well despite the brutal
knock-on effects of the credit crisis.
"Siemens got off to a good start in fiscal 2009, including
better order performance than most of our competitors in the
December quarter," Chief Executive Peter Loescher said.
But Ifo economist Klaus Abberger told Reuters it was too
early to sound the all-clear on the German economy.
Germany profited from a global economic upswing in recent
years but its strong dependence on the export sector has now
emerged as a weakness as foreign demand slumps.
"I have never seen, in my more than 40 years of experience,
such a sharp slump as we have seen in the past months,"
ThyssenKrupp (TKAG.DE) Chief Executive Ekkehard Schulz told a
general shareholders meeting last Friday.
Last week, the government forecast the economy would
contract by 2.25 percent this year. Since World War Two, the
economy has never contracted by more than 1 percent in a year.
The government forecast was a marked downward revision from
a projection it made last October for 0.2 percent growth,
highlighting just how quickly the outlook for the economy has