Signs that the debt crisis is striking at the core of the euro zone eased slightly today as business confidence in Germany, Europe's top economy, showed a surprise bounce.
The Ifo economic institute's closely watched business sentiment index rose to 106.6 in November, compared to 106.4 in October, the first rise in four months and contrary to analysts' expectations.
"The German economy is still performing relatively well despite the international turmoil," said the president of the institute, Hans-Werner Sinn. The rise completely wrong-footed analysts, who had predicted a decline to 105.1.
The index "improved somewhat in November for the first time in four months. The slight increase is due to somewhat less sceptical business expectations," said Sinn. "The current business situation, according to the survey responses, remains positive," added the economist.
A weak German bond sale yesterday had stoked concerns that the euro zone debt crisis was seeping from the weak countries on the periphery of the bloc to the core, thought until recently to be safe.
Germany suffered the unusual humiliation of very weak demand at an auction for its bonds, until now considered the gold standard for euro zone debt and a safe haven against the crisis.
Earlier, official data confirmed that stepped-up consumer spending and investment lifted growth in Germany, the biggest EU economy, in the third quarter to 0.5%. The figures confirmed previous estimates.
Gross domestic product rose 0.5% in the third quarter, following a 0.3% expansion in the second quarter, the federal statistics office Destatis said in a statement. "There was more consumption but also more investment than in the previous quarter," it said.
The data confirmed that Germany outperformed its neighbours during the three months ending September 30. However, economists see signs of a looming slowdown in the fourth quarter as the euro zone debt crisis takes a toll.
In the retail sector, traditionally a weak link in Germany's economy, household spending grew 0.8% while public sector spending rose 0.6%. Investment in equipment - mainly machines and vehicles - surged 2.9% but fell 0.7% in the building sector, Destatis said.
Meanwhile exports, normally the backbone of the European powerhouse, did little to boost growth as they increased 2.5%, at a slightly lower clip than imports at 2.6%. In a year-on-year comparison using seasonally adjusted data, German growth hit a robust 2.6% in the third quarter, Destatis said.
