July 25, 2013 9:25 pm

German business morale creeps higher


BERLIN – German business morale edged up for a third straight month in July in a sign Europe’s largest economy is picking up steam and should post modest growth in this election year, although the eurozone’s travails still weigh on the mood.

A bastion of strength in the early years of the currency bloc’s crisis, the German economy narrowly avoided recession at the start of 2013 as a worsening global outlook diminished appetite for its products and willingness to invest.

Yet recent data suggest Europe’s growth locomotive is tentatively recovering thanks mainly to domestic demand – good news for Germany’s trade partners within the eurozone, where private industry bounced back to growth this month.

The Ifo think-tank said on Thursday its business climate index, based on a monthly survey of some 7,000 companies, rose to 106.2 in July from 105.9 in June. The reading was just above the consensus forecast in a Reuters poll of 40 economists for 106.1. “July’s small rise in the German Ifo adds to evidence that the economy is recovering, but the recovery is likely to be modest,” said Jennifer McKeown at Capital Economics. “Recent weak hard data on trade and industrial production were a warning not to get too carried away about the speed of the recovery.”

The recent picture has been mixed although it suggests the economy is gaining traction. Industry orders and output tumbled in May, yet a purchasing managers’ index showed the manufacturing sector returning to growth in July.

Non-industrial data have picked up more, with consumer morale improving, retail sales rising and joblessness falling in stark contrast to the soaring unemployment in much of Europe.

© Reuters Limited. Click for restrictions


Sign up for email briefings to stay up to date on topics you are interested in