German Companies Are Optimistic

New study says companies expect stabilization

German firms are getting over the recession blues and expect a stabilization in Europe's biggest economy after the turmoil of recent months, the closely watched Ifo survey suggested on June 22.

The Ifo institute's business climate index for June rose for a third straight month to reach 85.9 points. It was the highest reading since November last year when Germany unveiled the first of two huge stimulus packages to try to help the country escape the worst effects of the global economy's biggest downturn in decades.

The institute said that while firms' dissatisfaction with the current business situation was just as strong as it was in May, the survey results "confirm that the German economy is gradually stabilising."

The Ifo index measuring sentiment among 7,000 firms about current conditions fell slightly, to 82.4 points from 82.5 points in May, while for business expectations the reading rose to 89.5 points from 86 points.

Jennifer McKeown at Capital Economics called the Ifo survey "encouraging" but said any pick-up in activity in "might be some time coming" and that a slump of at least six percent was still on the cards for this year. For 2010, McKeown was less optimistic that the government, predicting a "stagnation" rather than Berlin's forecast of growth of half a percentage point.

The results mirrored another survey published on June 18, the ZEW index, which jumped to a three-year high for June, and an upbeat poll of companies by the German Chamber of Commerce, or DIHK.

Last week, the economy ministry also expressed cautious optimism, saying that after a 3.8% slump in first quarter gross domestic product (GDP), "signs of a stabilization" were increasing.

Copyright Agence France-Presse, 2009

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