Another evidence of improving German economy

06-22-2009 14:02

Europe’s main economy continues to ease in June, proved by the German business confidence which improved for a third month. The business climate gauge rose from 84.3 to 85.9 in may and is based on a review executed under 7.000 executives by the Ifo Institute for Economic Research, a Munich-based research institution. In March the gauge proved the highest level in 26 years, while economist forecasted a rise to 85. After this report the single currency dropped to $1.3860.

Germany’s economic slump could bottom

A worldwide recovery adds optimism to the export outlook while the German recession could reach its end. Production orders rose in March while they remained stable in April and investor confidence climbed to the highest level in three years in June. The German coalition invests approximately € 85 billion ($118 billion) in order to boost economic growth. However, Europe’s largest economy will decrease by 6.2% this year and will remain stable in 2010, according to the Deutsche Bundesbank.

The worst may lie behind us

Juergen Michels, at Citigroup Inc. in London commented: “It is possible that the slump is weakening but it’s not yet over.” He also stated: “The economy and the prospects for increasing external demand are stimulated by the economic stimulus measures.” The expectations gauge by the Ifo climbed from 86 to 89.5 and an indicator of present conditions dropped from 82.5 to 82.4.

Too early to determine upswing

Gernot Nerb, an economist at Ifo said that the present situation “remains very worrying and it’s still premature to tell if the economy is stabilizing”.
Praktiker Bau- und Heimwerker AG announced that last month’s revenue improved since the last week of March. Siemens AG repeated its earnings and sales targets for 2010 once again and its chief executive officer, Peter Loescher, said: “The economic situation will remain complicated during the following months,” and “the slump is easing, so there is a realistic hope that the end of the recession comes closer”.
German unemployment figures for May were better than economists expected, while German service and production industries decelerated more slowly.

Positive trend

“Even a minor pick up in demand will result in increasing manufacturing”, according to UniCredit MIB’s chief German economist, Andreas Rees. He went on by saying: “Exports will increase during 2009 and the trend remains optimistic.”
Detlef Wittig, sales chief of the Volkswagen AG Group, commented on June 12: “The worldwide car markets, excluding the Chinese car market, don’t improve and the end of the crisis could still be far away.”
The second largest airline of Europe, Deutsche Lufthansa AG, will continue to economize in order to prevent a loss in 2009.

Stabilization phase

The ECB lowered its benchmark rate to 1%; a record low, which provides banks the opportunity to lend money unlimited during a period of 12 months in a new auction of this week in order to stimulate the credit flow.
Ewald Nowotny, governor of the Oesterreichische Nationalbank and also council member of the European Central Bank, commented that the bank will probably leave the interest rates unchanged into 2010 in order to support the recovery of the Eurozone economy. Axel Weber, president of the Deutsche Bundesbank, believes that the economy is stabilizing but that a considerable recovery is still far away.