23rd Feb 2015 11:47
BRUSSELS (Alliance News) - German business confidence improved for a fourth consecutive month in February to its highest level in seven months, but the pace of strengthening was modest amid concerns over the uncertainty surrounding the Greek situation.
The Ifo Business Climate climbed to 106.8 from January's 106.7. Economists had forecast a stronger score of 107.6. The latest reading, however, was the best since July last year, when it was 108.1.
"Satisfaction with the current business situation decreased somewhat, but companies expressed greater confidence in future business developments," Ifo Institute President Hans-Werner Sinn said. "The German economy is proving robust in the face of geopolitical uncertainty."
The monthly survey by the Munich-based Ifo is carried out among 7,000 firms in the manufacturing, construction, wholesaling and retailing sectors.
The expectations index of the survey edged up to 102.5 from 102. Economists had expected 103. The measure also rose for a fourth successive month.
Meanwhile, the current conditions gauge fell to 111.3 from January's 111.7. This defied economists' expectations for an improvement to 112.7. It was the first decline in three months.
Capital Economics' economist Jennifer McKeown reckoned that February's smaller-than-expected rise in the Ifo index may be an early sign that businesses are worried about the wider effects of the Greek crisis.
"The weaker euro has yet to have a strong effect on German firms and that hopes about the impact of ECB QE are being offset by fears over Greece," McKeown said.
The economist cautioned of the risk of a much worse impact if the crisis in Greece continues and its effect on economic sentiment throughout the euro-zone intensifies. That said, McKeown expects the steady recovery in Germany to continue.
On Friday, Eurozone finance ministers agreed on a four-month extension for Greece's bailout program, calming fears of an exit of the country from the euro area. The deal calls for Greek and European officials to agree on a series of reforms by the end of April.
The Ifo survey revealed an improvement in manufacturers' six-month business outlook to its highest level since August 2014, led by export demand. Optimism regarding the future increased in wholesaling and retailing, but was damped in construction.
The German economy expanded 0.7% in the final three months of 2014, which was the fastest rate in three quarters, driven by domestic spending and exports.
Last week, Bundesbank said the German economy will gain momentum this year. The European Commission expects the largest Eurozone economy to grow 1.5% this year and 2% in 2016.
Copyright RTT News/dpa-AFX