RTTNews - A business climate indicator for the German industry and trade improved for the fifth straight month in August providing further evidence that the Eurozone economy is on the road to recovery.
The business climate index rose to 90.5 in August from 87.4 in July, the Munich-based Ifo Institute for Economic Research said Wednesday. That is the highest reading since September last year. Economists had expected the indicator to climb to 89.
There is still sufficient scope for this important leading indicator to keep rising at least in the next six months, Commerzbank chief economist Jörg Krämer said.
The business climate index is calculated based on 7,000 monthly survey responses of firms in manufacturing, construction, wholesaling and retailing.
German manufacturing firms felt the business climate less unfavorable in August than in the previous month, while it clearly improved in the wholesale sector. Business climate indexes for retailing and for the construction sector have risen somewhat.
The survey found that manufacturers no longer expect business conditions to worsen in the rest of the year, though they are dissatisfied with current business. Their intention to reduce staff-level is no longer quite so sharp, yet they are reluctant to start new recruitment.
Ifo president Hans-Werner Sinn said, The German economy is slowly recovering from its descent.
The current situation index rose to 86.1 in August from 84.4 in July and the expectations index climbed to 95 from 90.4.
Rise in business climate follows news on Tuesday that the biggest-Eurozone economy exited recession in the second quarter by growing 0.3% on a quarterly basis following contractions in past four quarters.
As the growth in the second quarter was triggered by massive government stimulus measures and loose monetary policy, it is widely argued that Germany is unlikely to sustain the expansion.
European Central Bank Governing Council member Axel Weber said earlier this month that German economy is not yet capable of carrying itself and its financial markets are still functioning on central bank helps. However, he is of the view that Germany may outperform expectations in the third quarter.
Commerzbank economist said it is becoming clearer and clearer that the German economy should be growing strongly in the third quarter. The bank forecast a quarterly economic growth of 0.8% in the third quarter.
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