German optimism up in positive sign for Europe's economy

AP News
Posted: Feb 22, 2017 5:37 AM
German optimism up in positive sign for Europe's economy

FRANKFURT, Germany (AP) — German business optimism rose unexpectedly in February as executives appeared to shrug off initial worries about U.S. President Donald Trump's policies, providing another sign that Europe's economy is gaining pace.

The Ifo institute index rose to 111.0 points from 109.9 the previous month. That confounded market analyst expectations for a dip to 109.7 and leaves it well above its long-term average of 101.9 points.

The Munich-based research institute surveys 7,000 businesses in Europe's biggest economy about their view of how things are right now and how the situation will develop in coming months. Sentiment had weakened slightly in January.

Ifo head Clemens Fuest said in a statement Wednesday that "after a restrained start to the year the German economy is again on a good path."

The economy of the 19-country eurozone grew 1.7 percent last year. Unemployment has slowly fallen to a still-painful 9.6 percent. The recovery has been supported by large-scale monetary stimulus from the European Central Bank, which has lowered its interest rate benchmark to zero and pumped newly printed money into the economy through purchases of government and corporate bonds.

Germany's economy has been supported by strong domestic demand and low unemployment of only 3.9 percent, buttressing its traditional export strength in autos and machinery.

Economist Carsten Brzeski at ING-DiBa said that German businesses "have digested initial concerns about the possible negative economic implications of the new U.S. president," Trump. The new administration's trade advisor has accused Germany of benefiting from an excessively weak euro. Almost 10 percent of Germany's exports go to the U.S., so any hint of trade tensions can cause uneasiness.

Florian Hense, economist at Berenberg Bank, said that "German industry may be concerned, but definitely not scared." He said the Ifo result "provides further evidence that the German economy stepped up a gear at the start of 2017."