–Corrects Structure of First Paragraph

Apr MNI analysts survey Mar Feb
median range
————————————————————————
Business sentiment: 109.9 109.5 108.5 – 110.1 109.8 109.7
Current conditions 117.5 117.0 116.0 – 117.6 117.4 117.4
Six-month outlook: 102.7 102.3 101.0 – 103.0 102.7 102.4
—

FRANKFURT (MNI) – Business sentiment in Germany improved slightly
in April, reflecting a brighter assessment of the current situation, the
Ifo institute reported on Friday.

After five months of increase, Ifo’s business climate indicator
surprised to the upside again, rising 0.1 point to 109.9, its highest
level since July. Most analysts had expected a modest decline.

“The German economy is proving resilient,” Ifo President
Hans-Werner Sinn said in a press release.

After stalling in March at 117.4, the current conditions component
also gained 0.1 point to a six-month high of 117.5, surpassing most
analysts’ forecasts.

The expectations component was unchanged at 102.7 following five
consecutive months of increase. Most analysts had expected a small
erosion.

In manufacturing, improving sentiment lifted the sub-indicator 1.4
points to an eight-month high of 15.4. Both present conditions and
expectations brightened, Ifo noted, adding that manufacturers were
boosting capacity utilisation. Companies also planned to continue
hiring, though at a “slightly more conservative” pace than in March.

Morale in the construction sector dropped six points to -3.8, its
lowest so far for 2012, on the back of a deteriorating current situation
and a less optimistic view of the upcoming six months.

Optimism among wholesalers also lost further ground in April after
reaching a peak in March, falling 0.1 point to 12.7. Retailers, by
contrast, were slightly more upbeat, as reflected in the 0.1-point rise
in sentiment to 10.8.

“Retailers report some deterioration in their business situation
and an improvement in their business outlook,” Ifo commented. “A greater
number of wholesalers, on the other hand, are satisfied with their
current business situation, while their expectations clouded over
slightly.”

The unadjusted services index was unchanged on the month at 22.4,
as a recovery in current conditions offset a further erosion in
expectations.

The ongoing improvement in Ifo’s sentiment index after the
unexpectedly optimistic assessment of analysts canvassed last week by
Germany’s ZEW think tank is reassuring in light of the ongoing slowdown
in industry orders and the slide in the PMI polls.

March’s composite PMI (51.6) slipped to its lowest level in three
month on the back of contracting factory output and slowing growth in
services. Falling industry orders (46.3) and the squeeze on profit
margins from rising input costs point to further weakness ahead.

ZEW President Wolfgang Franz also noted that Germany faces
“considerable risks such as the economic slowdown of important trading
partners, the rise of prices for crude materials and the sovereign debt
crisis in the Eurozone.”

Germany’s leading economic institutes, including Ifo, see the
economy regaining strength this spring following a lull in 1Q on the
back of a strong labour market and low interest rates.

“As in previous years, the main impulses will come from domestic
demand, and especially from investment and private consumer
expenditure,” the institutes said, projecting GDP growth of 0.9% this
year and 2.0% next year.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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