–Adds Results for Sectors

Dec MNI analysts survey Nov Oct
median range
————————————————————————
Business sentiment: 107.2 106.2 105.0 – 106.9 106.6 106.4
Current conditions 116.7 116.4 115.5 – 116.7 116.7 116.7
Six-month outlook: 98.4 97.3 96.3 – 97.5 97.3 97.0
—

FRANKFURT (MNI) – Business sentiment in Germany continued to
demonstrate surprising strength in December, rising for the second
consecutive month, as respondents grew more optimistic regarding their
short-term outlook and the current situation remained “favourable”, the
Ifo institute reported on Tuesday.

Since its surprise recovery in November, the headline figure gained
an additional 0.6 point to 107.2 to its highest level since September
and above all analysts’ forecasts.

“The German economy seems to be successfully countering the
downturn in western Europe,” Ifo President Hans-Werner Sinn said in a
press release. “This bodes well for Christmas.”

The current conditions index was unchanged at 116.7, matching the
most optimistic forecasts. Expectations overshot all projections, rising
to a four-month high of 98.4.

Manufacturing sentiment was stable at +8.6 in December. While firms
viewed the current period slightly less optimistically this month, “there
is no question of a meltdown comparable to that of 2008,” Ifo’s Sinn
stressed.

“On the contrary, the German economy is showing signs of
stabilisation,” he added. “Firms even view their six-month business
outlook more favourably.”

The business climate in construction remained on an upward trend,
reaching a four-month high of -6.6, with improvements noted in both the
current situation and the six-month outlook.

Wholesaling and retailing sentiment also improved to close out the
year, hitting a respective +11.4 and +5.8.

“The business situation is assessed more positively than previously
at both levels of trade. In addition, retailers and wholesalers are more
optimistic,” the Ifo press release noted. “This suggests brisk Christmas
trade.”

After a dip in November, service sector morale rebounded 4.5
points to 19.6, its best result since August. Gains were noted both in
the current situation and the expectations sub-indices.

Despite the ongoing recovery in German business sentiment, the
ongoing debt crisis and the uncertain global economic climate continue
to weigh on growth prospects, as evidenced by the latest PMI report, in
which respondents blamed the further deterioration in new orders on
clients putting off spending decisions.

The ZEW’s economic sentiment indicator painted a similar picture in
December, as most investors polled expected economic activity to slow in
the short term.

“Financial market experts’ uncertainty due to the debt crisis in
the Eurozone has already been reflected by the negative balances of the
ZEW indicator of economic sentiment in the previous months,” ZEW noted.

Ifo expects German GDP growth to slow sharply to 0.4% in 2012 after
3.0% this year, as private consumption, investment and exports all lose
steam.

Slightly more optimistic, the Organisation for Economic Cooperation
and Development also sees growth decelerating next year to 0.6% after
3.0%.

“Economic activity is expected to recover gradually during 2012 as
uncertainty declines and trade picks up,” the OECD said in its autumn
Economic Outlook. “Growth rates may then rise above potential from
around mid-2012, given the absence of underlying imbalances in household
and corporate balance sheets and only moderate fiscal consolidation
needs.”

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

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