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German outlook improves
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June 17, 1999: 11:28 a.m. ET
Business confidence climbs for third month; boosts euro recovery
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LONDON (CNNfn) - The German economy is set to post higher growth in the second half of the year as a surge in manufacturing output overcomes fragile consumer confidence, according to an influential German business survey released Thursday.
The business climate index for western Germany compiled by the Munich-based Ifo Institute climbed to 90.4 in May after hitting a 30-month low of 89.7 in April.
The index of business expectations rose for the third straight month, reaching 98.3 from 96.4 in April. The expectations index is viewed as a more important figure by economists as the climate numbers have a three month time lag.
The numbers were in line with expectations but helped halt the recent slip in the euro which had reached $1.0302 in Asian trading. It climbed to $1.0349 following the Ifo's release.
"The performance was stronger than the headline numbers suggest," said Adrian Schmidt, European economist at Chase in London. "It suggests that manufacturing is accelerating."
Economists dismissed any impact on the European central bank's interest rate policy in the near term and also played down the impact of the euro's 17 percent slide against the dollar since January.
Schmidt said while it would help the competitiveness of exports, this would not show up in the output data for at least six months. Hence, the improvements suggested by the Ifo survey of 6,000 German companies had "very little" to do with currency effects.
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