German Business Confidence Falls Back Slightly

German business confidence fell in February to the lowest level in more than 18 years as business managers worried the government’s stimulus program and interest-rate cuts from the European Central Bank won’t be enough to revive the economy. The Ifo institute's business climate index, which is based on a survey of 7,000 executives, fell to 82.6 from 83 in January. That’s the worst reading since the institute started collecting data for a reunified Germany in 1991.




The German parliament agreed last week to more than double the government’s fiscal stimulus to about 80 billion euros - or around 1.6 percent of German gross domestic product - to try to reduce the impact of what is now the country’s worst recession since World War II.

“The reality is sinking in that a recovery may take a lot longer than initially anticipated, even with all the stimulus packages,” said Kenneth Broux, an economist at Lloyds Banking Group Plc in London. “As an export nation Germany epends on the global economy, and that will remain very weak.”

The current conditions component fell to 84.3 from 86.8, while the expectations sub component rose to 80.9 from 79.5.




Germany’s benchmark DAX share index has dropped 19 percent in 2009, closing at the lowest in more than four years yesterday.

French Consumers Rebound


French consumer spending rebounded a little more than expected in January. Spending on manufactured goods in January was up by 1.8 percent as shoppers sought bargains in the New Year sales. However French consumer confidence fell this month to minus 43 from a revised minus 42 in January.

As Maryse Pogodzinski, an economist at JPMorgan Chase points out, the confidence index “remains at very low levels with barely any room for improvement and their spending is increasingly under threat with even the middle class starting to feel the chill,”.

French unemployment rose above 2.1 million in December, the most in more than two years. Gross domestic product fell by 1.2 percent in the fourth quarter of 2008, the biggest quarterly drop in three decades.

Italian Consumer Confidence Rebounds

Italian consumer confidence rose in February,moving against the trend for the second consecutive month, as optimism about slowing inflation lifted Italians' view of their personal finances and the economy generally. The ISAE seasonally-adjusted index showed consumer confidence rose to 104.1 from 102.6 in January, taking it to back to the levels of December 2007, although, of course, it should be noted that the Italian economy was already near recession at that point.





ISAE said confidence was boosted by the current stability of prices and the calmer inflation outlook for the year ahead.

"At this phase consumers seem to be feeling the benefit of the slowdown in current and expected inflation trends," according to the ISAE report, which added that this was raising spirits regarding savings, family income and the outlook on durable goods. ISAE underlined the advances in the sub-index on personal finances to 119.1 from January's revised 117.3 and the "current conditions" sub-index, incorporating sentiment on the economy and personal finances, which rose to 111.6 from a revised 110.3.

The future outlook also rose to 90.7 from a revised 90.6. But confidence in the state of the economy fell to 71.7 from January's revised 72.1, though it was still higher than the December number of 71.0. Overall, the consumer confidence index remains far below its long-term average of around 113 and the surprise improvements in sentiment in the last two months come against a background of bleak economic news for Italy.

The Italian economy is forecast to shrink at least 2 percent this year, the worst result since 1975, giving Italy two consecutive years of contracting gross domestic product for the first time since World War Two.