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German Ifo Business Sentiment Strengthens On Signs Of Abating Debt Crisis


Sentiment among German businesses improved more than forecast in January to its highest level since June last year with the domestic economic prospects brightening amid signs of debt crisis in the euro area abating.

A survey by the Ifo Institute revealed Friday that the headline business climate index rose to a seven-month high of 104.2 in January from 102.4 in December. The reading was forecast to increase to 103. The survey found that the sentiment has improved for a third consecutive month.

"With biggest fears of a Eurozone break-up fading away and the improved outlook for the US and China, prospects for the German economy are also clearing off," Carsten Brzeski, an economist at ING Bank NV, said.

The current conditions index rose to 108 in January from 107.1 in December. This was expected to rise to 107.3. Future business perspectives improved considerably with the expectations index rising to 100.5 from 97.9 in the previous month. Economists had forecast a modest increase to 98.5

Sentiment rose notably in manufacturing and construction sectors, while there was deterioration in confidence among wholesalers.

January's rise in the German Ifo business survey provides further hope that fourth quarter's estimated sharp fall in GDP will be a one off, Ben May, an economist at Capital Economics said.

The German economy is estimated to have contracted 0.5 percent in the final quarter of 2012. Both the government and the central bank forecast 0.4 percent GDP expansion for 2013 after 0.7 percent growth in 2012.

In its latest monthly report, Bundesbank said that Germany's economic slowdown is likely to be short-lived, as the biggest euro area economy's prospects have improved at the beginning of the year.

A survey published by the Center for European Economic Research/ZEW earlier this week revealed that Germany's economic confidence strengthened in January to the highest level since May 2010, as financial experts saw the prospects for the economy brightening on a six-month-time horizon.

However, the International Monetary Fund expects the German economic growth to continue slowing this year with the GDP rising 0.6 percent in 2013. In 2014, the growth is seen picking up to 1.4 percent.

by RTTNews Staff Writer

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