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German Business Confidence Soars to 30-Month High: IFO

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German Business Confidence Soars to 30-Month High: IFO

Business confidence in Germany rose to the highest level in 30 months, a sign Europe’s largest economy is gaining traction at the start of 2014.

The business climate index, courtesy of the Munich-based CESifo Group, rose from 109.5 to 110.6 in January, beating economists’ forecasts. January marked the third consecutive month business confidence rose in Europe’s largest economy.

“Expectations regarding future business developments reached their most optimistic level in almost three years,” said Ifo president Hans-Werner Sinn in an official statement. “The German economy made a promising start to the New Year.”
Business expectations among German executives reached their most optimistic level in nearly three years, with the expectations index rising from 107.4 to 108.9. Executives’ assessment of the current situation also improved, with the current assessment index rising from 111.6 to 112.4.

Business conditions improved across Germany’s industrial economy, today’s data showed. Stronger export expectations boosted manufacturers’ outlook, while optimism concerning future business developments rose significantly among wholesalers and construction companies.

A rebounding export market is key to Germany’s growth prospects in 2014, if recent data are any indication. German exports rose at a rate of 0.6 percent last year, compared to 3.2 percent in 2012. In real GDP terms, Europe’s largest economy expanded by a mere 0.4 percent last year.

The Bundesbank believes Germany will rebound “strongly” in the first half of 2014. The German economy could expand by as much as 2 percent in 2014, according to estimates.

The Ifo report marks the first of several important German releases this week. The GfK Institute will report on German consumer confidence Wednesday, followed by official employment and consumer inflation data Thursday.

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