German firms confidence improve

May 25, 2009

, BERLIN, May 25 – Confidence among German firms rose to a six-month high in May, a key sentiment index showed on Monday, suggesting that Europe\’s top economy might be pulling out of its worst slump in over 60 years.

The closely watched Ifo indicator rose for the second consecutive month to 84.2 from 83.7 in April, adding to evidence that sentiment is again on the up in Germany, the world\’s top exporter.

The result was slightly worse than expected, however. Analysts surveyed by Dow Jones Newswires had expected the index to rise to 85.0.

The survey "points to a gradual stabilisation of economic output at a low level," the Ifo institute\’s head Hans-Werner Sinn said in a statement.

Economists see the index as a key leading indicator to gauge the future health of the economy. It had been falling steadily — with occasional blips — since June 2008 as sentiment among firms plummeted due to the financial crisis.

Tempering the optimism, however, was a sub-index showing that companies\’ assessment of the current situation in Germany dropped in May to 82.5, its lowest level ever.

"All in all, the survey results suggest that we are over the worst of this downturn," said Marco Bargel, an analyst at Postbank.

He added: "But the renewed bad assessment of the current situation shows that the way out of this recession will be difficult and definitely not smooth."

Nevertheless, the brighter outlook from the 7,000 German firms surveyed is the latest in a string of more positive data to emerge from Europe\’s economic powerhouse.

Industrial orders and exports recently showed their first increases after falling for several consecutive months.

Another closely-watched sentiment index, which measures the outlook of players in the financial markets, also rose to a near three-year high in May after a seventh rise in a row, data from the ZEW institute showed on Tuesday.

Economists said the outlook for Germany\’s heavily export-driven economy was brightening as signs of recovery spread around the world with more positive news also from Japan and the United States.

Last Monday, US Treasury Secretary Timothy Geithner said the US economy had begun to stabilise, although he warned that a recovery would be "bumpy" and "fragile."

European Central Bank president Jean-Claude Trichet signalled last week that the global economy is near a turning point.

And Japan\’s central bank offered a more optimistic view of prospects for the world\’s second-largest economy earlier Monday, saying it saw a gradual leveling-out.

The bank said that exports and production, the key drivers of Japan\’s economy, were improving.

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