This week, two key business surveys were released in Germany
showing that business managers remain optimistic about the health
of the German economy amid an ongoing European recession.
Both the ZEW Economic Sentiment Index and the more recently
released IFO Business Climate Survey pointed to strong
expectations about the future, pointing to at least a modest
recovery in the eurozone economy.
The confidence in German business leaders comes despite the
European Union downgrading its growth forecasts for 2013. The EU
now predicts that the European economy will contract 0.3 percent
in 2013. Previously, the group had forecast growth of 0.1 percent
for 2013. 2014 forecasts were left unchanged.
Earlier this week, the ZEW Economic Sentiment Index, a broad
measure of business confidence, rose to 48.2 from 31.5 in
January, better than forecasts of a 35.0 reading.
The massive jump was boosted by both the current assessment
sub-index and the expectations index, meaning that not only are
leaders confident on the current state of the German economy but
also the near future, pointing to upsides to growth in the near
Friday, the German IFO Business Climate Index rose to 107.4
from 104.3 in January, beating expectations of a jump to 105.0.
Again, strong jumps in both the current assessment and the
expectations sub-indexes point to both stronger growth now and in
the near future.
Both of the surveys tend to be good leading indicators for the
German, and by default, the broad European economy, meaning that
continued strength in Germany could help to drag the Eurozone out
of recession, or at least a less severe one.
However, the EU downgrading German growth forecasts to 0.5
percent growth from 2.0 percent previously for 2013 shows that
headwinds still remain in the German, European, and broad global
Should Germany continue to improve its economic condition,
exports will grow and global trade will tick higher. This will
help to boost the global economy and could be a potential driver
for the next cyclical leg up in the global economy.
However, as the summer approaches, expect momentum to cool
heading into the end of the second quarter as businesses tend to
slow operations in the summer months in lieu of added down
The German DAX Index jumped 1.12 percent on the stronger than
expected news, driving gains this year to 0.67 percent and 12.12
percent for the past 12-months. Only two stocks in the index
traded lower out of 30, with industrials and financials leading
Notably, Commerzbank (
) shares declined 1.19 percent in Germany after the bank was
criticized by bond market behemoths Blackrock (NYSE:
) and PIMCO for issuing covered bonds backed by risky small- and
medium-sized business loans; covered bonds normally are backed by
either real estate or other hard assets.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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