German business sentiment rose sharply in December, defying expectations for a decline and underscoring the resilience of Europe's largest economy in the face of a sovereign debt crisis that has hammered growth in other euro zone members.
The Munich-based Ifo think tank said today that its business climate index, based on a monthly survey of some 7,000 companies, rose to 107.2 in December from 106.6 in November, posting its biggest monthly rise since February.
It was the second successive rise after November's equally surprising gain.
Analysts welcomed the rise but took care not to overplay its significance, particularly in the wake of depressing recent German export and manufacturing data.
"The small rise in the December's Ifo index is a welcome surprise but hardly transforms the outlook for the economy," said economist Jonathan Loynes at Capital Economics.
"All of the indices are still sharply down on their summer readings... Overall, there is some encouragement here that the German economy is not currently plunging into recession, but the picture is one of very weak growth at best," he added.
Economist Viola Stork at Helaba noted the three-month average for the combined Ifo index showed a slightly lower level than the July-September quarter, which indicated weaker GDP growth in the fourth quarter.
News of the data gave some support to the beleaguered euro , which traded at $1.3046, up from an 11-month low of $1.2944 hit last week. It also helped European stocks climb, halting a two-week slide.
"The German economy seems to be successfully countering the downturn in Western Europe. This bodes well for Christmas," Ifo president Hans-Werner Sinn said in a statement.
The Ifo business expectations sub-index proved particularly strong, rising to 98.4 from a previous 97.3, the biggest gain since July 2010, and well in excess of a forecast for 97.0.
The figures dovetailed with data from the GfK institute released earlier on Tuesday showing consumer morale held steady going into January, bucking expectations for a fall, as income expectations and views of the economy improved.
Reuters
