German ifo Surprises

German business and investor confidence has beaten forecasts every month this year, suggesting the strength of Europe's largest economy may have been underestimated.

The Ifo institute's business climate index, which today unexpectedly rose to a nine-month high, has beaten the median forecast in Bloomberg News surveys every month since September. An investor confidence index published by the ZEW Center for European Economic Research has exceeded the median estimate for the last five months.

“German companies taught nervous financial markets another important lesson today,” said Andreas Rees, an economist at UniCredit Group in Munich. “One should not underestimate the German economy and its resilience.”

The Ifo report and today's U.K. retail data showing the fastest sales increase in more than a year add to evidence of strength in Europe after the debt crisis damped the region's growth in the fourth quarter. In Germany, companies have increased sales to faster-growing markets in Asia, and unemployment at a two-decade low is bolstering household spending.

Germany's leading economic institutes, including Ifo, yesterday raised their joint growth forecast for 2012 to 0.9 percent from 0.8 percent and predicted expansion of 2 percent in 2013, even as the debt crisis cripples euro-area peers. The Bundesbank in December forecast gross domestic product will increase 0.6 percent growth this year and 1.8 percent in 2013.

Bloomberg