German economic survey points to modest growth

AP News
Posted: Jul 25, 2013 5:15 AM

FRANKFURT, Germany (AP) — German business optimism rose slightly more than expected in July, a closely watched survey revealed Thursday, the latest in a series of signals indicating moderate growth ahead for Europe's biggest economy.

The Ifo institute's business climate index rose to 106.2 during the month from 105.9 in June. The increase was slightly more than the 106.1 widely expected in the markets.

The third monthly increase in a row provides more evidence that Germany remains on track to rebound from a lackluster performance in the last months of 2012 and the first quarter of this year. Ifo survey director Kai Carstensen said Thursday that "firms remain cautiously optimistic with regard to their future business outlook."

First-quarter growth was only 0.1 percent but the country's central bank says figures will show it grew "strongly" in the April-June second quarter. Official data are due out Aug. 14 alongside wider figures for the economy of the 17 European Union countries that use the euro.

The Germany economy, the largest in the eurozone, will be a key factor as the region struggles to get out of a recession that has lasted six straight quarters. A survey Wednesday raised hopes that the eurozone as a whole was poised to emerge from recession soon.

Economist Christian Schulz at Berenberg Bank in London said the Ifo survey "signals moderate growth" in the Germany economy, which should remove the need for further interest rate cuts from the European Central Bank. He said export expectations were somewhat weaker as China, a key market for German companies, slows.

The ECB's governing council meets next week to decide interest rates for the eurozone. The benchmark refinancing rate is at a record low of 0.5 percent.

The index is based on surveys of 7,000 firms in manufacturing, construction, wholesale and retail.