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Recession unlikely as German optimism rises
Source: Agencies |
December 20, 2012, Thursday
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A KEY measure of German business optimism rose slightly more than expected in December, suggesting Europe's largest economy will avoid a recession despite a recent slowdown in growth.
The Ifo institute said yesterday that its main index rose to 102.4 from 101.4 in November. The consensus expectation among market analysts was 102.
The survey is a leading indicator of the economy's direction in the months ahead. It's based on a poll of 7,000 business executives about how they see things now and six months from now.
Their views about current conditions darkened, suggesting that the fourth quarter may see the economy shrink slightly. But that was outweighed by brighter expectations for the future, suggesting that an outright recession, defined as two straight quarters of falling output, is unlikely.
The German economy grew only a modest 0.2 percent in the third quarter from the previous three-month period, down from 0.3 percent the quarter before.
Many economists think it will skirt with recession before growth improves next year.
Economist Alexander Koch at UniCredit is predicting a 0.2 percent quarterly drop in the fourth quarter, but noted that the Ifo results "signal the end of contraction" and that growth would strengthen next year.
Christian Schulz, senior economist at Berenberg Bank, said the brighter outlook would help growth.
The Ifo institute said yesterday that its main index rose to 102.4 from 101.4 in November. The consensus expectation among market analysts was 102.
The survey is a leading indicator of the economy's direction in the months ahead. It's based on a poll of 7,000 business executives about how they see things now and six months from now.
Their views about current conditions darkened, suggesting that the fourth quarter may see the economy shrink slightly. But that was outweighed by brighter expectations for the future, suggesting that an outright recession, defined as two straight quarters of falling output, is unlikely.
The German economy grew only a modest 0.2 percent in the third quarter from the previous three-month period, down from 0.3 percent the quarter before.
Many economists think it will skirt with recession before growth improves next year.
Economist Alexander Koch at UniCredit is predicting a 0.2 percent quarterly drop in the fourth quarter, but noted that the Ifo results "signal the end of contraction" and that growth would strengthen next year.
Christian Schulz, senior economist at Berenberg Bank, said the brighter outlook would help growth.
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