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December 19, 2009

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Business confidence rising in Germany

GERMAN business confidence rose for the ninth consecutive month in December as Europe's biggest economy continued to recover steadily from its worst recession in decades, a leading survey showed yesterday.

The Ifo business climate index rose to 94.7 points - its highest since July 2008 - from 93.9 points in November. The increase was modestly higher than market expectations and stoked hopes that the recovery is on track.

"After the dramatic economic collapse last winter, these survey results should bring some Christmas cheer," said Ifo president Hans-Werner Sinn.

The Ifo index is based on 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing. Its long-run average stands at just below 96.

Overall, Ifo indicated that firms were more positive about their current situation - the sub-index swelled to 90.5 points from 89.1 points the previous month. Expectations for the next six months rose too to 99.1 from 98.9 in November.

"The upward trend for expectations has slowed down but remains unbroken, which bodes well for a continuing recovery also during the first half of 2010," Klein said. "That being said, risks for a temporary setback later on during 2010 remain sizable, in which case a sustained return to solid economic growth may only occur in 2011."

Germany's economy returned to growth in this year's second quarter. The government forecast it will grow by 1.2 percent next year after contracting 5 percent in 2009.

Munich-based Ifo said the climate in the manufacturing sector improved over the previous month, though businesses were still "somewhat more reserved" about the coming six months. The climate in the construction sector brightened slightly.

The wholesaling and retailing sectors also improved.

In a bid to boost spending, Germany's upper house of parliament yesterday approved tax cuts for companies and families.


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