More Evidence That Germany's Growth Is Sustainable

The euro was hovering just below the $1.34 mark in the early hours of Wednesday as confidence returned to the 17 nation bloc. Positive data has attracted investors back to the eurozone despite looming problems like Italy's current political situation and sky high unemployment figures.

reported that the German business climate index climbed to 107.5 in August, its highest level in 16 months. The figure beat forecasts of 107 and showed sizable improvement from July's 106.2 reading. The business climate index came shortly after GDP data showed Germany led the eurozone out of its longest ever recession by growing 0.7 percent in the second quarter. Even more impressive, the growth came from private consumption, which many see as a good sign of a sustainable recovery. However, the report's findings were not as positive when it came to construction activity. The figures showed that German construction activity fell to -4.2 in August, compared to -1.5 in July. Also worrying was the report's measure of retailing, which slipped to 2.6 from 3. Despite that, most still see the German economy as on track for a strong recovery. The Bundesbank is expecting German GDP to grow by 0.3 percent in 2013 and a further 1.5 percent in 2014. As for the eurozone as a whole, the outlook isn't as rosey. The European Central Bank has predicted that the eurozone will contract 0.6 percent in 2013 before returning to growth and expanding 1.1 percent in 2014. The bank's president, Mario Draghi, has promised that the ECB would keep rates at 0.5 percent for an extended period to support the region's recovery.