November MNI analysts survey October September
median range
———————————————————————–
Business sentiment: 109.3 107.4 106.6-108.2 107.7 106.8
Current conditions: 112.3 110.4 109.7-111.0 110.2 109.8
Six-month outlook: 106.3 104.4 103.1-105.5 105.2 103.9
—

FRANKFURT (MNI) – German business morale improved for the sixth
consecutive month in November, beating even the most optimistic
forecasts, as firms grew more optimistic regarding both the current
situation and the six-month outlook, the Ifo institute reported on
Wednesday.

As a result, the sentiment indicator jumped to 109.3 this month,
its highest point on record.

“The upswing in the German economy is gaining more and more
strength,” Ifo said in a press release.

The current conditions component rose 2.1 points to 112.3, a
31-month high, while the expectations figure hit an all-time high of
106.3.

The growing business optimism is in line with the stronger than
expected rise in the most recent purchasing managers indices (PMI),
which pointed to accelerating gains in both manufacturing and services
output.

According to the PMI report, fresh demand in the private sector
underpinned a rise in output, with new business in services hitting a
37-month high (55.6), while industry orders increased at the fastest
pace since July (59.9).

“Strong rises in manufacturing production remain the overall driver
of the recovery, but service sector growth has quietly gained momentum
in the second half of the year,” said Markit economist Tim Moore, noting
that confidence in services had reached its highest point in over four
years.

The strong rebound in the Centre for European Economic Research
(ZEW)’s investor sentiment indicator this month also hinted at a further
improvement in business confidence.

“Compared to other industrialised countries, the German economy has
seen a stronger recovery so far,” the ZEW noted. “Moreover, the positive
development of the German labour market has stimulated domestic demand.”

German manufacturers have upwardly revised their assessment of the
business climate, lifting the figure for the second consecutive month to
25.1, its strongest showing since May 2007.

“The firms are clearly more satisfied with their business situation
than in October,” the Ifo press release noted. “In addition, the survey
participants anticipate a favourable development in the near term, their
expectations for business in the coming six months having risen.”

Within the construction industry, optimism continued to recover
after August’s setback, boosting the sentiment sub-indicator to a
four-month high of -14.8.

“The surveyed building contractors are clearly more satisfied with
their current business situation than in October,” Ifo said. “However,
they are not quite as confident about business development in the coming
half year as before.”

Wholesalers and retailers also grew more optimistic this month, as
reflected in the respective sentiment figures rising to 22.4 and 13.3.

Sentiment in the service sector improved for the fifth month
running, with the climate figure hitting a 41-month high of 23.4.

“For the sixth time in succession, the surveyed service providers
have given more positive assessments of their current business situation
over the previous month,” Ifo said. “They are also more confident
regarding the six-month business outlook than in October.”

While GDP growth slowed to 0.7% in 3Q from 2.3% in 2Q, both
domestic and foreign demand continued to support the recovery. Expanding
employment and rising revenues should underpin domestic demand in the
months ahead, cushioning the economy from any further cooling in the
global economy.

The Organisation for Economic Co-operation and Development (OECD)
expects GDP growth of 3.5% this year and 2.5% next year, “implying that
the pre-crisis real GDP level will be reached in the course of 2011.”
For 2012, the OECD forecasts an “above-trend” growth rate of 2.2%.

“The outlook over the projection horizon is fairly bright,” the
OECD said last week. “Growth is likely to remain dynamic during 2011,
with world trade projected to remain on an upward trend. In addition,
private consumption growth is envisaged to be stronger than usual at
this stage of the upswing, owing to continued employment gains and solid
wage increases.”

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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