German business confidence rose to the highest level for more than 14 years in February as the spark of recovery jumped from exports to domestic demand, a survey showed today.
IIB economist Austin Hughes described the news as the final piece of information needed to ensure that the European Central Bank raises interest rates at its next meeting on March 2.
The widely watched business climate index, calculated each month by the Ifo economic research institute, rose by 1.5 points to 103.3 in February, Ifo said in a statement. It was the sixth monthly rise in a row and the highest reading since October 1991. Analysts had expected the February index to be flat.
'The business climate index rose again in February, continuing the ongoing upward trend observed since the summer of 2005,' said Ifo chief Hans-Werner Sinn. 'In addition to exports, domestic demand now also appears to be picking up.'
For its monthly survey, Ifo polls about 7,000 companies about their assessment of current business and their expectations for the next six months. A breakdown of the data showed that the current sentiment sub-index also rose to 101.9 points in February from 99.7 points in January. The expectations sub-index was also up, climbing to 104.8 points from 103.8.
'Companies are a lot more satisfied with current business and also more confident about the outlook for the next six months,' Ifo chief Sinn said.
Earlier today, the GfK market research group found that consumer sentiment remains buoyant, despite high energy prices and high unemployment.
Meanwhile, Mr Hughes expects the main euro zone rate to rise by a quarter-point to 2.5% next week as fears about the effect of a rise on economic recovery fade. He believes rates could go as high as 3.5% by the end of 2006.
