Sharp Rise in German Business Confidence

Germany’s Ifo economic research institute said on Thursday its business climate index rose more than expected to 96.8 from 95.7 in November. The climb marked the highest level since Jan. 2001, boosting hopes that the tentative recovery in Europe’s largest economy is gathering pace. Hans-Werner Sinn, president of the Munich-based research institute said the renewed improvement in the business climate index confirmed that "the recovery had set in" and was "gaining strength." Sinn added that almost all industrial sectors were feeling the effects of the upswing, "even the construction industry." Most of the improvement in the index -- based on a monthly survey of 7,000 companies -- came from a strong rise in business expectations which surged to their highest level for nine years. However, economists are cautioning restraint. One of them told German television channel ARD, "we might have a new high with the Ifo index, but the numbers also conceal weaknesses." Indeed business climate in east Germany worsened, slipping from 104.6 to 105.2.