German Business Confidence Soars To 15-Year High

Signaling a solid recovery in Europe's largest economy, business confidence in Germany has reached a 15-year high point, the Ifo business climate index showed on March 28.

The Ifo index soared to 105.4 points in March -- the highest reading since April 1991, the year after German unification, and up from 103.4 points in February. The February reading was revised from 103.3 points.

Hans-Werner Sinn, head of the respected Munich-based Ifo institute, said that optimism had spread through most sectors of the economy and that the most marked improvement had been registered in the poorer former communist eastern states.

"After five very lean years, Germany seems to be heading for a serious economic upswing," said Holger Schmieding, an economist with the Bank of America. "Taken at face value, the Ifo projects a cyclical boom and not just a tame upturn."

Edward Teather of UBS Investment Research in London said the Ifo index, in addition to an 8% rise in the M3 measure of money supply in February -- had broader positive implications for the eurozone as a whole. "The strength of German business confidence implied by the Ifo in recent months has clearly outstripped that of the other large euro area economies," he said.

"However, while the acceleration in German growth may not be repeated in full elsewhere, it should provide a lift to activity growth in Germany's trading partners," Teather added.

"German businesses are becoming much more upbeat about the recovery in domestic demand conditions as unemployment continues to trend lower," commented David Brown of investment bank Bear Stearns.

Copyright Agence France-Presse, 2006

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