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UPDATE 1-German firms more upbeat about economy - DIHK
May 30, 2012 / 8:43 AM / 5 years ago

UPDATE 1-German firms more upbeat about economy - DIHK

BERLIN, May 30 (Reuters) - German companies are more upbeat about their business outlook thanks to robust domestic consumption and demand from export markets beyond the euro zone, the German Chambers of Industry and Commerce (DIHK) said on Wednesday.

The DIHK raised its forecast for 2012 German economic growth to 1.3 percent from a previous estimate of 1.0 percent made in February on the back of its thrice-yearly survey of some 25,000 member companies.

Uncertainty arising from the euro zone debt crisis had returned and austerity measures were damaging European demand, but German firms were confident in their global competitiveness and were registering especially strong demand in Asia, it said.

“Overall, companies’ evaluations of the current situation are exceptionally good,” the DIHK wrote. “Companies’ outlook for the coming months is considerably more optimistic.”

Some 25 percent of companies saw their business outlook improving versus 22 percent at the start of the year.

“Companies’ export expectations have been brightening for the first time in a year, which shows the confidence of exporters in asserting themselves despite the difficult European context,” it added.

Moreover, domestic demand was stable thanks to the strong labour market and wage hikes, prompting many Germans to invest in real estate, the DIHK said.

Companies were investing more due to high capacity utilization and low interest rates.

“Domestic-oriented sectors such as the construction, retail and services sectors, are hiking their investment budgets,” the DIHK said. “Industrial companies still remain actively focussed on investing.”

Germany’s “Teflon economy” has held up much better than its European peers and it grew 0.5 percent in the first quarter, saving Europe from recession.

But sentiment has started sliding in recent weeks, as the euro zone crisis unsettled businesses. The closely watched survey by the Ifo think tank showed business sentiment collapsing in May, and a purchasing managers’ index showed the manufacturing sector shrinking.

Germany’s two biggest steelmakers, ThyssenKrupp and Salzgitter, gave a grim outlook for the rest of the year earlier this month as the euro zone crisis crimps spending on factories and new equipment.

The DIHK survey was conducted from April to the start of May. The DIHK’s forecast for 1.3 percent economic growth in 2012 compares with the government’s more cautious forecast for a 0.7 percent expansion.

The DIW Institute for Economic Research said on Wednesday German economic growth would ease to 0.3 percent in the second quarter from 0.5 percent in the first due to the euro zone crisis weighing on exports. (Reporting By Sarah Marsh and Alice Baghdjian; Editing by Toby Chopra and Susan Fenton)

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