German Investor Confidence Probably Rose as Growth Holds Up
Investor confidence in Germany probably rose for a third month in April on signs Europe's largest economy is coping with a stronger euro and the U.S. slowdown, a survey of economists shows.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to minus 30 from minus 32 in March, according to the median of 41 forecasts in a Bloomberg News survey. The gauge reached a 15-year low of minus 41.6 in January. ZEW will publish the report at 11 a.m. in Mannheim today.
German exports to eastern Europe and Asia have risen even after the euro's 17 percent gain against the dollar in the past year, nurturing economic growth in the face of record oil prices and soaring credit costs triggered by the U.S. housing slump. Business confidence rose for a third month in March and industrial production increased in February.
“Germany's industrial sector has held up really well so far,'' said Dominic Bryant, an economist at BNP Paribas in London, who expects the ZEW to climb to minus 22.3. “Even though it won't escape the slowdown, it will still outperform most of its European trading partners.''
While the benchmark DAX share index has shed 19 percent this year, it rallied 1.6 percent in the past month, outperforming Europe's Dow Jones Stoxx 600.
IMF Disputed
Henkel KGaA, the German consumer-goods maker, yesterday maintained its forecast for sales and profit growth this year. Bayerische Motoren Werke AG, the world's largest maker of luxury cars, said April 7 global sales rose 8.2 percent in March from a year earlier.
Resilience in Germany, which accounts for about a third of the 15-nation euro-region economy, is giving the European Central Bank room to leave interest rates at a six-year high to fight inflation.
The economy had a “good'' first quarter, Bundesbank President and ECB council member Axel Weber said April 11. “I don't share the International Monetary Fund's pessimistic view.''
The IMF last week cut its prediction for German economic growth this year to 1.4 percent from 1.6 percent, saying the euro's appreciation will slow exports while oil prices over $100 a barrel and higher credit costs curb spending cash advance flexible payments. The IMF recommended the ECB start cutting interest rates.
Defaults on U.S. subprime mortgages have caused about $245 billion in asset writedowns and credit losses so far at the world's biggest banks and securities firms. That's made banks reluctant to lend, pushing up borrowing costs globally.
Tighter Credit
A third of medium-sized German companies are already finding it more difficult to get loans, the Creditreform agency said April 1. The cost of borrowing euros for three months rose to 4.75 percent yesterday, the highest level since Dec. 27.
Companies and consumers are also grappling with higher energy and food prices, which drove Germany's inflation rate to 3.2 percent last month. Crude oil prices have climbed 73 percent over the past year, reaching a record $112.21 a barrel April 9.
Still, moderate wage accords and an export boom have helped shore up investment, which together with higher employment will sustain economic growth this year, the Organization for Economic Cooperation and Development said April 9. It kept its forecast for German growth this year unchanged at 2.1 percent.
German companies “still find themselves in a good position to expand investment and jobs, even if the global credit crisis and rising commodity prices will slow the pace'' of expansion, the OECD said.
The economy is “more robust than the U.S.,'' German Finance Minister Peer Steinbrueck said April 11, adding he sees no need to “correct our growth expectation'' for 2008 of 1.7 percent.
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