Survey shows slight Q1 growth in Germany

The German economy probably avoided falling into recession in the first quarter of this year, according to a survey of business sentiment published Monday that helped ease pessimism about prospects for the rest of Europe.

The Ifo business climate index, which is considered a reliable predictor of the direction of the largest economy in Europe, rose slightly more than expectations in March to its highest level since July, the Ifo Institute in Munich said.

While the index pointed only to modest growth, the resiliency of German business confidence helped calm fears that the economic powerhouse of Europe was slowing down.

Last week, a survey of purchasing managers by the research firm Markit signalled that the broader euro zone probably slipped into recession in the first quarter of 2012. The Markit survey also showed that German manufacturers were becoming less optimistic.

Thomas Harjes, an analyst at Barclays, pointed out that the Ifo index surveys 7,000 companies, seven times as many as the Markit survey. The Ifo survey therefore captures more small and mid-sized enterprises oriented toward domestic customers, he said.

The Ifo survey showed “that the domestic economy is performing better than the export-oriented sector,” Harjes wrote in a note to clients.

The survey said retail businesses were more upbeat than manufacturers, a possible sign that thrifty Germans are finally spending more. Germany typically exports much more than it imports, a point of contention in other euro countries, which would like Germany to buy more of their products.

“German household spending coming on board, on the back of a buoyant labour market and higher wage growth, is crucial to help rebalancing the euro area,” Christel Aranda-Hassel, an economist at Credit Suisse, wrote in a note.

While economists generally portrayed the Ifo results as positive, some were more cautious. Hans-Werner Sinn, president of the Ifo Institute, noted that the indicator rose more slowly in March than in previous months.

“The German economy is losing some of its momentum,” he said in a statement.

© 2012 The New York Times News Service