German business confidence hits record high

FRANKFURT: German business confidence hit a third straight record high this month, the Ifo institute said Monday, as analysts cheered the results and hailed an exceptional rebound in Europe's top economy.

The ninth consecutive rise in the closely watched index caught economists surveyed by Dow Jones Newswires off guard and was taken as a sign that Germany has brushed off the worst effects of the eurozone debt crisis.

The headline index nudged up to 111.2 points in February after posting 110.3 points in January, leading Alexander Koch, an analyst at UniCredit to say that "the sky is the limit" for Germany, the world's second exporter after China.

Commerzbank chief economist Joerg Kraemer said the outcome was also the highest reading for the former West Germany since 1969.

Meanwhile, for the 17-nation eurozone, manufacturing and service activity in February hit levels last seen in July 2006, another closely-watched survey showed.

The purchasing manager's index (PMI) compiled by the research group Markit jumped from 57.0 points to 58.4 points in February, owing to a sharp pick-up in both the manufacturing and service sector indices.

"In addition, the most forward-looking index of the survey, (the new orders index) kept increasing, signalling that in March the survey is likely to post another rise," BNP Paribas economist Clemente De Lucia said.

In a sign that the eurozone may be over the worst of its crisis, the PMI revealed improved readings for France, Ireland and Spain despite austerity measures in the latter two countries, Koch noted.

Taken together, the PMI and Ifo indicators provide "evidence that the eurozone and German economic recoveries may have regained momentum at the start of the year," Capital Economics European economist Ben May said.

Following the deepest recession in more than six decades in 2009, the German economy has bounced back strongly as global demand for its goods has revived.

For this year, Berlin expects growth of 2.3 percent, dipping slightly to 1.8 percent in 2012.

Cheering the results, Economy Minister Rainer Bruederle said: "The German economy has left the crisis behind and is now in top shape."

IHS Global Insight economist Timo Klein forecast that, barring a collapse in global momentum, the German economy could even expand by 2.7 percent this year.

Recent data "testify to the continuing buoyancy of the German economy, which shows no sign of being hurt to any significant extent by the dampening influences related to the Eurozone debt crisis," he said in a research note.

Moreover, the recovery in Germany appeared to be becoming more broadly based, with manufacturing firms planning to hire more workers and the construction sector also looking with greater optimism towards the future.

"The upswing in the German economy is robust," said the president of the Ifo, Hans-Werner Sinn.

The index showed a slight dip in the sentiment of retailers but this failed to dampen analysts' enthusiasm.

"Today's outcome is remarkable since it had not been expected by the vast majority of economic experts," said Peter Kaidusch from Natixis.

Carsten Brzeski drew parallels between recent periods of fast growth in Germany and the current situation, citing buoyant exports, economic reforms and resurgent domestic demand.

"The start to the New Year could have hardly been better. The economy might not reach the stars but it will continue to fly high this year," said the ING analyst.