For the first time in five months, German business sentiment looked up most unexpectedly even in the face of the worsening debt crisis in Europe. Although economists had expected that the business climate index of the Munich-based Ifo institute would decline to 105.2, it rose to 106.6 from 106.4 in October.
Andrea Rees, chief German economist at UniCredit Markets and Investment Banking in Munich said “Although downside risks certainly remain, doomsday is not around the corner. A recession, and especially a deep and nasty one, is not in the pipeline.”
Even in the face of diminishing demand for Germany’s exports across the euro region, unemployment is near a two-decade low leading to greater consumer spending. However, the growing debt crisis is still casting its shadow on Europe’s largest economy which was evident yesterday when Germany’s offer of sale of its 10-year bonds failed to get the desired response as only 35 percent of the bonds on offer were sold.
In Frankfurt, the euro went up by about a quarter of a cent after Ifo’s report before it went back to $1.3375 at 11:40 a.m. There was a gain of 1.3 percent in the benchmark DAX share Index. Ifo’s gauge of the current situation remained static at 116.7 whereas an index of executives’ expectations rose to 97.3 from 97.