December MNI analysts survey November October
median range
———————————————————————-
Business sentiment: 109.9 109.4 108.3-109.8 109.3 107.7
Current conditions: 112.9 112.6 111.5-112.8 112.3 110.2
Six-month outlook: 106.9 106.2 105.0-106.8 106.3 105.2
—
FRANKFURT (MNI) – German business morale improved for the third
consecutive month in December, reaching a new record high as companies’
assessment of both the current situation and six-month prospects
brightened beyond even the most optimistic forecasts, the Ifo institute
said on Friday.
As a result, Ifo’s business climate indicator rose 0.6 point to
109.9, a new series high.
“In the course of the entire year 2010, the business climate index
has risen sharply,” Ifo President Hans-Werner Sinn said in a press
release. “Following an increase in exports, especially investments have
been responsible for the upswing, and the outlook is now even good for
consumption.”
Disaggregating the headline figure, current conditions component
increased to 112.9, while expectations reached 106.9.
A number of indicators have hinted at further strengthening in
business sentiment in the near term, including Markit Economics’ latest
composite purchasing managers index (PMI), which rose to a 4.5-year high
of 59.7 in December of the back of robust growth in private sector
output, work backlogs and new business.
“The manufacturing sector appears to have shrugged off the slowdown
seen during the autumn, as output growth accelerated for the third month
running and job creation hit a survey record high,” Markit economist Tim
Moore said.
“Meanwhile, business activity at service providers continues to
rise sharply, placing the sector on a much stronger footing for the year
ahead than was the case at the end of 2009.”
However, downside risks could materialize should economic activity
slow on the back of declining demand out of Eurozone peripheral states,
as some have forecast.
“Currently available data point to a noticeable slowdown in the
first quarter of 2011,” the Bundesbank said, citing trends for industry
orders.
The European Commission also highlighted the risk to the German
economy that weakening external demand poses.
“A sharper-than-expected deceleration of foreign demand, disruptive
exchange rate developments or a surge in protectionist tendencies pose
downside risks to the current growth outlook and could imply a setback
to the ongoing recovery,” the Commission said in its Economic European
Forecast late last month.
The decline in the Centre for European Economic Research (ZEW)’s
economic sentiment indicator could also signal upcoming weakness in
sentiment, with investors noting risks to German exports due to the
prospect of a more contractionary Chinese monetary policy.
Results for the various sectors covered by the Ifo’s industry and
trade sentiment figure were mixed.
In manufacturing, respondents assessed the current situation just
as positively as in November. However, they saw developments in the near
term as slightly worse than before, which lowered the overall sentiment
figure by 1.5 points to 23.7.
Sentiment in construction also fell back in December, slipping 0.9
point to -15.7, due solely to a less favourable assessment of their
current situation. However, this was partially offset by growing
optimism for the upcoming six months.
Retailers and wholesalers continued to grow ever more optimistic in
December, with both groups assessing the current situation and six-month
outlook more positively. As a result, the respective business climate
figures rose to 26.2 from 22.5 and to 24.0 from 13.4.
The Ifo services business climate indicator also strengthened this
month, reaching 24.9 from November’s 23.4, with respondents planning to
add to staffing levels.
“The service providers have once again assessed their present
business situation more favourably than in the previous month,” Ifo
said. “In addition, they are more optimistic regarding the six-month
business outlook.”
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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