German business confidence rises

The resilience of Europe's biggest economy to the debt crisis was underscored Friday as German business confidence beat expectations to rise for the sixth month in a row in April.

The Ifo economic institute's closely watched business climate index edged fractionally higher to 109.9 points in April from 109.8 points in March, defying analysts' expectations for a slight decline.

"The German economy is proving resilient," said Ifo president Hans-Werner Sinn.

Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.

And while the outlook sub-index was unchanged at 102.7 points in April from March, the sub-index measuring current business inched higher to 117.5 points from 117.4 points.

Analysts, who had largely been predicting a slight dip in this month's index following the recent strong gains, were reassured by the latest reading.

IHS Global Insight economist Timo Klein argued that the German economy was benefitting from historically low interest rates, subdued euro levels and persisently solid global growth.

"Overall, latest Ifo data provide reassuring evidence that the German economic recovery will not be thrown off track again on account of the recent rise in oil prices or persisting eurozone debt crisis risks," he said.

UniCredit economist Andreas Rees agreed.

"The latest renewed increase... signals once again that one should not underestimate the German economy and its resilience towards adverse effects," he said.

"Despite the renewed flaring up of concerns about the European debt crisis, companies have been steering the course," the analyst said.

Newedge Strategy analyst Annalisa Piazza conceded that "the global slowdown is certainly affecting the German economy. However, the overall index signals further modest improvement in activity in the second quarter of this year. We still expect the German economy to run at around 1.0-1.5 percent in 2012."

By contrast, ING Belgium economist Carsten Brzeski felt the Ifo data painted "too positive a picture of the growth prospects for the German economy."

Since the beginning of the year, "the discrepancy between soft and hard data has increased significantly," Brzeski said.

While confidence indicators continued to increase, pointing to a very optimistic picture of the economy, "the real economy has troubles picking up pace again," the analyst added.

With austerity programmes set to put the brakes on growth in most other core eurozone economies and the US economy still anything but dynamic, "export growth should clearly come down," Brzeski said.

Furthermore, hopes for more domestic consumption on the back of higher wage could easily be disappointed, he cautioned.

"Of course, with a lack of domestic imbalances and no pressing cleanup efforts, the German economy remains the six-cylinder growth engine of the eurozone. However, it is not running at full throttle anymore," Brzeski said.

Capital Economics economist Mark Miller agreed.

"Predictions that the German economy will be strong enough to pull the wider eurozone out of its current problems could well prove wide of the mark," he said.