German Ifo Sentiment Probabaly Remains Unchanged

German business confidence was probably unchanged in May after two monthly declines amid doubts over the economic recovery.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, will remain at 104.4, according to the median of 44 forecasts in a Bloomberg News survey. Ifo releases the report at 10 a.m. in Munich today.

The German economy, Europe’s largest, grew just 0.1 percent in the first quarter after a 0.7 percent contraction in the final three months of 2012 as an unusually long winter damped construction and investment. The Bundesbank said this week that while risks stemming from Europe’s debt crisis remain high, the economy will gather pace in the current quarter. Factory orders surged for a second month in March and exports increased.

“The economy is expanding very slowly but at least it’s expanding again,” said Andreas Moeller, an analyst at WGZ Bank in Dusseldorf, who predicts the Ifo index will drop to 103.7. “Compared to the rest of the euro area, Germany is doing pretty well.”

Gross domestic product in the 17-nation currency bloc, Germany’s biggest export market, fell 0.2 percent in the first three months this year. It was the sixth straight contraction, making the current recession the longest in the euro’s 14-year history.

ECB Action

The European Central Bank cut its benchmark interest rate to a record low of 0.5 percent on May 2 and President Mario Draghi said he stands ready to act again if the economic outlook deteriorates.

The Frankfurt-based central bank forecasts the euro-area economy will shrink 0.5 percent this year before growing 1 percent in 2014. That compares with the Bundesbank’s prediction of 0.4 percent growth in Germany this year.

Puma SE (PUM), Europe’s second-largest maker of sporting goods, on May 14 cut its revenue and profit forecasts for this year after reporting first-quarter earnings that trailed analysts’ estimates. The “business climate in Europe remains challenging,” the Herzogenaurach, Germany-based company said in a statement.

Some German companies are compensating for weaker demand in Europe with sales to faster growing markets abroad.

Deutsche Post AG (DPW), Europe’s largest postal service, on May 14 reported profit that beat analysts’ predictions because of growth at express-delivery businesses in emerging markets.

“We’ve gotten off to a very solid start for the year in what is a very difficult macroeconomic environment,” Chief Financial Officer Larry Rosen said.

“The German economy will expand for the rest of the year but we should get ready for very low growth numbers,” said Anatoli Annenkov, an economist at Societe Generale SA in London, who predicts the Ifo index will ease to 104 this month. “Uncertainty will continue to weigh on exports to the euro area,” he said.

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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