German business confidence sees record rise

The Munich-based Ifo think tank today announced confidence among German firms has returned.

The Business Climate Index jumped to 106.2 points in July from 101.8 the previous month – the strongest rise for 20 years.

The reading also exceeded expectations of a fall to 101.5 points.

Germany, which is Europe’s largest economy, contracted by a record 5% in 2009 – the first time in six years the economy had contracted and the deepest since World War II.

The record contraction was due to a slump in demand in exports and investment. In 2009, exports plunged by 14.7% on the year, while investment in equipment fell by one fifth.

The fall in exports also led to Germany losing its status as the world’s largest exporter as China overtook it in this field.

Meanwhile, commenting on the figures, the Ifo institute said: “The rise is the biggest since German reunification. Firms are reporting significantly more favourable business conditions than last month.

“The German economy is in party mood again,” it added.

Last month, the Federal Labour Agency announced German unemployment fell in June to 7.5%, from 7.7% the previous month.

According to the agency, the number of people registered as unemployed fell by 88,000 to 3.153 million.

Germany’s job market is much stronger than in many other countries and many believe it is the result of the “Kurzarbeit” scheme, introduced by the German Government, designed to prevent mass redundancies.

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