BERLIN (Reuters) - German business morale edged up for a second straight month in June in a sign that Europe’s largest economy is slowly recovering after a contraction in late 2012 and a subdued start to 2013.
The Munich-based Ifo think tank said on Monday its business climate index, based on a monthly survey of some 7,000 firms, climbed to 105.9 in June from 105.7 in May, bang in line with the consensus forecast in a Reuters poll of 40 economists.
“Companies remained confident in June and continue to expect a good domestic economy. The devastating floods in Southern and Eastern Germany hardly influenced this outlook. That’s a good signal and confirms our expectations of a moderate economic revival in the second half. Risks in the international environment continue, such as recently the fierce reaction of investors to the monetary policy comments from the U.S. central bank.”
”June’s German Ifo survey echoes the slightly firmer tone of other recent indicators, but certainly does not point to any sort of boom in the euro-zone’s biggest economy.
The rise in the overall business climate indicator ... leaves the survey pointing on past form to annual German GDP growth of a solid 2 percent or so. Note, though, that the survey is far from perfect as a guide to GDP growth and June’s rise was driven entirely by an increase in expectations - the current conditions index actually fell back slightly, suggesting that the German economy is not yet recovering strongly.
“Note too that the retail trade index slumped back from 0.1 to -1.4, the lowest level since last October, underlining the continued weakness of German consumer activity. Overall, then, another moderately encouraging survey, but nothing to get too excited about.”
”Nice and steady. The German economy seems to cruise along nice and steady, defying any growth concerns.
”Since the start of the year, the German economy has gone through several ups and downs with an almost unprecedented dichotomy between soft and hard data.
”The harsh winter weather, the Cyprus bailout and now the floods have made it harder than usual to forecast the path of the German economy.
“Strong soft data at the beginning of the year was not followed up by strong growth. The external one-offs delayed the rebound of the economy. Judging from available hard data, this rebound should unfold in the second quarter. Industrial production surged, the construction sector more than offset the entire output losses caused by the harsh winter weather and exports regained momentum. Only private consumption seems to have taken a breather.”
“It’s hard to know to what extent the result was influenced by the floods of recent weeks. This should be the case especially for the current conditions index. Against this backdrop it is pleasant that the expectations index managed to improve. It is a sign that regardless of possible strains on the sidelines, the German economy will be able to continue its growth in the summer as well.”
“Companies’ expectations rose sharply. That points to a better third quarter than expected so far. It’s a positive signal that the upswing could gather speed.”
Reporting by Berlin newsroom