The manufacturing outlook remained broadly unchanged, with survey respondents reporting a deterioration in current business as compared with April but improved expectations over the next six months.
In wholesaling and retailing business climate has generally improved. Retailers are no longer so dissatisfied with their current business situation and anticipate a less unfavourable six-month business outlook. In construction the climate was found to have worsened again. Building contractors are less satisfied with their current business situation and havea less favourable business outlook than in April.
Chancellor Angela Merkel’s coalition has intorduced stimulus plans worth about 82 billion euros to try to offset the worst of the recession, and the government still expects the economy to contract by around 6 percent in 2009.
The European Central Bank this month reduced its benchmark rate to 1 percent, a record low, and ECB President Jean-Claude Trichet does not exclude the possibility of further cuts.
The top Germany economic institutes forecast the country will lose 1.4 million jobs this year and next, pushing the average number of unemployed to a five-year high of 4.7 million. German unemployment rose for a sixth straight month in April, taking the jobless rate to 8.3 percent.
On the other hand German manufacturing activity contracted at the slowest pace in seven months in May,according to the flash purchasing managers index, while investor confidence rose significantly this month, climbing to a three-year high.
Bundesbank President Axel Weber said recently “There are some grounds for being optimistic......However, it is certainly not advisable to be overly optimistic that the recovery process is safely on track.”