Ifo Business Confidence Probably Rose for Second Month

German business confidence probably increased for a second month in December, signaling Europe’s largest economy may support a euro-area recovery next year.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, will rise to 102 from 101.4 in November, according to the median forecast of 43 economists in a Bloomberg News survey. That would be the second straight increase after sentiment dropped to a 2 1/2 year low in October. Ifo releases the report at 10 a.m. in Munich today.

German factory orders and exports rose in October as shipments to countries outside Europe offset weaker demand in the 17-nation currency bloc, which is battling recession after governments cut spending to rein in excessive deficits. The Bundesbank said this week it expects the German economy to grow next year after shrinking markedly in the fourth quarter.

“I’m optimistic for the German economy,” said Gerd Hassel, an economist at BHF Bank AG in Frankfurt. “The rescue measures by the European Central Bank and governments will lead to a reduction of uncertainty in the euro area.”

Ifo’s measure of executives’ expectations probably rose to 96.4, the highest since June, from 95.2 in November, while a gauge of the current situation may have slipped to 108 from 108.1, the survey shows.

Gradual Recovery

The ECB’s new bond-purchase program and the creation of a single supervisor calmed financial markets and will help foster a gradual recovery in the euro area in the second half of next year, President Mario Draghi said Dec. 17. Still, the ECB revised down its economic forecasts earlier this month, predicting contractions of 0.5 percent this year and 0.3 percent in 2013.

The Bundesbank also lowered its growth outlook, anticipating expansions of 0.7 percent and 0.4 percent, respectively.

“Indicators point to a perceptible decline in economic activity at the end of the year,” the Bundesbank said in its monthly report published this week. Still positive export expectations and returning business confidence “may point to the fact that the period of economic weakness in Germany can be overcome soon.”

German growth slowed to 0.2 percent in the third quarter from 0.3 percent in the second as the euro area, Germany’s biggest export market, slipped into recession for the second time in four years.

Weaker Demand

Schaeffler AG, the roller-bearing maker that is the biggest investor in car-parts manufacturer Continental AG, last month lowered its 2012 sales forecast because of weaker demand in Europe and Asia.

At the same time, some German companies compensate fewer European orders with exports to faster growing economies.

Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, said on Dec. 7 it is targeting higher sales and profit next year, boosted by growth in the U.S. and China.

Daimler AG, another German luxury carmaker, is planning to almost double its 2011 car sales by 2020 by focusing on demand in China, Russia and the U.S., the company said Nov. 14.

“There are hopeful signs for the German economy,” said Natascha Gewaltig, head of European economics at Action Economics in London. “The current quarter looks pretty dismal for businesses but it looks like we will see stabilization next year.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE