German Business Confidence on a Nine-Month High

German business confidence increased to a nine-month high in April. According to the recent report from the Ifo institute, the business climate index, based on a survey of 7,000 executives, rose to 109.9 in April from 109.8 in March. Ifo's executives' expectations remained unchanged at 102.7, and a measure of the current situation increased to 117.5 from 117.4, while economists were expecting a decline across all these indicators.

The fact that the expectations index did not decline suggests that German companies believe that policy makers would take the necessary steps to manage renewed market concerns about Italy and Spain and contain the sovereign debt crisis.

Investor confidence rose to a two-year high this month. Unemployment dropped to 6.7 percent in March. Factory orders rose 0.3 percent in February and exports increased for a second month in a row.

The Finance Ministry reiterated this point today saying that German corporate tax revenue grew 22 percent in March from a year earlier due to stronger export growth led by demand from outside Europe and falling unemployment, which fuels domestic consumer spending.

The recent data suggests that the German economy, which contracted in the final quarter of last year, is on the way to recovery and may have avoided a recession.

Source: Bloomberg