German business confidence rises
BERLIN, Germany (Reuters) -- German business confidence increased for an eighth month in December in the latest sign that an upswing is underway in Europe's largest economy.
The Ifo economic research institute said on Thursday that its western German business climate index rose more than expected to 96.8, the highest since January 2001, from 95.7 in November.
The rise was led by a jump in the expectations component to the highest in nine years. Economists polled by Reuters last week had predicted an increase to 96.5.
The Munich-based think tank, which polls about 7,000 firms each month, said the strengthening of optimism in December was "primarily the result of more favorable expectations.''
"The renewed improvement in the business climate index in west Germany confirms the expectations of the Ifo institute that the economic recovery has set in and is gaining strength,'' Ifo President Hans-Werner Sinn said in a statement.
"The surveyed sectors that have lagged behind are also beginning to recover,'' he added.
Companies' future expectations jumped to 111.0 in December, the highest since November 1994, from 108.7 the previous month, Ifo said. Their assessment of current conditions rose slightly to 83.3, from 83.2.
"Overall it's a good result,'' said Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt. "I think this data signals that we'll have growth coming half from exports and half from domestic demand in 2004.''
Germany returned to growth in the third quarter, as a broadening global recovery boosted demand from abroad for its exports.
Germany had been mired in its longest period of stagnation since the Second World War and slipped into recession in the first half of the year.
Hessler said this week's cross-party agreement on lower-than-expected tax cuts in 2004 could hit consumer and business sentiment and lead to a flat Ifo index next month.
The German economy accounts for about one third of the euro region's gross domestic product.
Ifo's index of business confidence for eastern Germany fell to 104.6, from 105.2, as expectations for the future declined and the assessment of current conditions was unchanged.
The Ifo data contrasted with gloomy Italian figures. Italy's ISAE economic research institute said its core index of Italian consumer confidence, which strips out seasonal and other variations, plumbed fresh seven-year lows in December, falling to 104.8 from an upwardly revised 105.1 in November.
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