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Germans optimistic.

German business sentiment rose for the third month in a row in January, beating expectations and offering fresh evidence that Europe's largest economy is shrugging off a sovereign debt crisis that has hammered growth in other euro zone countries. The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 companies, rose to 108.3 in January from a revised 107.3 in December, its highest level since August and the biggest monthly increase in 11 months. The reading was at the top end of expectations in a Reuters poll of 39 economists that produced a median forecast of 107.5. It sent the euro to a session high versus the dollar. "Did anyone say recession? Today's Ifo index shows that the German economy only made a short stopover at the end of last year and is now heading towards expansion again," said Carsten Brzeski, an economist at ING in Brussels. "The widely-spread fear that the euro zone's biggest economy could now also be caught by the crisis virus has been soothed." A sub-index on expectations posted the biggest monthly climb since July 2010, a sign businesses are confident that Europe's powerhouse will return to healthy growth from the second quarter of the year. It rose to 100.9 from a revised 98.6. Ifo's sub-index on current conditions fell to 116.3 from 116.7 in December. Economists said the third consecutive increase signaled a turning point in Germany's outlook, with growth broadening again, prompting JP Morgan analysts to expect German quarter-on-quarter gross domestic product (GDP) growth of around 1 per cent in the first three months of the year. Germany's government predicts the economy will grow 0.1 per cent in the first quarter. "We have hit the floor with GDP in the first quarter," Unicredit economist Andreas Rees said.

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Publication:Gulf Industry
Date:Feb 1, 2012
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