German business confidence unexpectedly rose for the first time in five months in November, defying Europe’s worsening debt crisis.
The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 106.6 from 106.4 in October. Economists expected a decline to 105.2, according to the median of 40 forecasts in a Bloomberg News survey.
“Germany is actually in a strong position and the order books are still full,” Carsten Brzeski, an economist at ING Group in Brussels, said before the release. “As long as the labor market and domestic spending hold up, we’re only looking at a soft patch, not a full-blown recession.”
The German economy, Europe’s largest, is showing signs of cooling as the escalating debt crisis damps demand for its goods across the 17-nation euro region. While German unemployment remains near a two-decade low, supporting consumer spending, the Bundesbank this week slashed its growth forecast for 2012 to between 0.5 percent and 1 percent from 1.8 percent.
The euro rose about a quarter of a cent after Ifo’s report and traded at $1.3397 at 10:11 a.m. in Frankfurt. Ifo said its gauge of the current situation held steady at 116.7 while an index of executives’ expectations climbed to 97.3 from 97.
Domestic Demand
The European Commission on Nov. 10 cut its euro-region growth forecast for next year to 0.5 percent from 1.8 percent, citing the debt crisis. In Germany, growth may slow to 0.8 percent in 2012 from 2.9 percent in 2011, the Brussels-based commission projected.
While the economy expanded 0.5 percent in the third quarter, growth was driven almost solely by domestic demand, a final reading from the Federal Statistics Office showed today.
Manufacturing output contracted for a second month in November and investor confidence dropped to a three-year low.
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U.K. Economy Grew 0.5% in Third Quarter
U.K. economic growth accelerated in the third quarter as stockbuilding and government spending offset weak consumer spending and business investment
Gross domestic product rose 0.5 percent from the previous quarter, when it increased 0.1 percent, the Office for National Statistics said today in London. The figure matched a previous estimate and the median forecast in a Bloomberg News survey of 32 economists. Consumer spending was flat on the quarter, while investment fell 0.2 percent. Underlying growth “is weak,” the office said.
The Bank of England, which has restarted bond purchases to aid the recovery, said yesterday that underlying growth was probably weaker than the reported figure due to “heightened uncertainty” related to the euro-area crisis. The bank slashed its 2012 growth forecast by more than half and policy makers have signalled more stimulus may be needed in future.
“There are early signs that the economy contracted in the fourth quarter and there’s not reason for it to get much better thereafter,” Vicky Redwood, an economist at Capital Economics Ltd. in London and a former central bank official, said before the report. “A lot depends on how the euro-zone situation evolves.”
From a year earlier, the economy grew 0.5 percent in the third quarter, the statistics office said.
The pound pared its gain against the dollar after the report was published. It traded at $1.5548 as of 9:36 a.m. in London, up 0.2 percent on the day.
