Confidence rises in Germany

Confidence in the German economy has unexpectedly surged following six consecutive decreases.

The Ifo Business Climate Index, which measures how German businesspeople view the prospects for the economy, rose for most sectors over the past month.

“Companies expressed slightly greater satisfaction with their current business situation,” said president of the Ifo Institute, Hans-Werner Sinn. “They were also far less pessimistic about future business developments. The German economy is holding up in the face of the euro crisis.”

Respondents from the wholesale sector expected a sharp rebound in activity. Businesses in the manufacturing, construction, and retail sectors also expect an improvement over the near to medium term. However, the services sector saw a slight drop over November.

The German statistics office released third-quarter GDP figures yesterday which showed that economic growth slowed to 0.2% compared with growth of 0.3% over the second quarter. Economic expansion in the third quarter was primarily driven by exports and household spending, the data breakdown shows.

Net trade contributed 0.3 percentage point to growth, and private consumption added 0.2 percentage point.

Europe’s largest economy is still outperforming most of its eurozone partners as exporters benefit from demand in faster growing markets abroad. Still, the sovereign debt crisis is taking its toll on Germany as demand within the euro region wanes, companies cut investment and unemployment begins to rise.

Exports are expected to fall in the coming months.

Exports rose 1.4% in the third quarter from the second, more than the 1% rise in imports. Private consumption gained 0.3% and construction investment rose 1.5%. Construction added 0.1% point to third-quarter growth, while company investment in plant and machinery subtracted 0.1%. Inventories also dragged on growth.

While exports grew in the third quarter, they fell 2.5% in September from August, the statistics office said in a separate report this month.

Deutsche Post, Europe’s largest postal service, said on Nov 8 that third-quarter profit fell 6.5% as a pay increase caused spending to rise.

“We see as well a slowdown of import and export volumes,” chief executive Frank Appel said in an interview with Bloomberg Television. “The German economy is not as strong as it has been in the past two years.”

Additional reporting by Bloomberg