German Business Confidence at Three-year High

Germany has raised its 2010 growth forecast to 3.4%

Boosted by a rebound in Europe's biggest economy from a downturn that still weighs on its neighbors, business confidence in Germany has hit its highest level in three years, a key poll showed on Oct. 22.

Analysts pointed to a strong gain in expectations for the next six months that suggest an anticipated slowdown in German activity might be shorter than expected.

The Ifo economic research institute said its business confidence index rose to 107.6 points in October from 106.8 points the previous month.

Ifo's business expectations index rose to 105.1 points from 103.9 points in September meanwhile, defying an analyst forecast for a drop to 103 points.

"This is a very interesting pattern," UBS economist Martin Lueck commented, because it meant the start of the fourth quarter was stronger than forecast and companies were more optimistic than believed going into 2011. "It could mean that the slowdown in economic activity signaled by most other lead indicators may well be more short-lived than feared so far."

Ifo president Hans-Werner Sinn said that German companies "have once again given more positive assessments of their current business situation and their business expectations have improved."

The survey was released a day after Germany raised its 2010 growth forecast to 3.4% and data showed activity across the 16-nation eurozone slumping to a 12-month low in October in both the manufacturing and services sectors.

A breakdown of the Ifo data showed gains in most sectors, though retailers were slightly less upbeat than before.

Copyright Agence France-Presse, 2010

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