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Last Updated: Tuesday, 28 October, 2003, 13:25 GMT
German firms upbeat on growth
BMW production line
Firms are feeling more positive
German business confidence improved more strongly than expected in October, according to the leading Ifo index.

Confidence rose for the sixth month in a row, hitting 94.2 and trouncing forecasts of a wafer thin improvement to 92.1 from 92 in September.

The survey of 7,000 West German executives also found them more optimistic about current conditions as well as the future outlook.

The findings have bolstered hopes of an economic recovery in Germany, Europe's biggest economy.

Over the worst?

"This confirms the government's opinion that the trough has been passed," a spokeswoman for the Economy Ministry said.

Germany has more than four-and-a-half million unemployed, a bulging budget deficit and an economy in recession.

The Ifo research institute said its index of confidence in current conditions rose to 81.1 from 79.2.

This part of the index fell in September, sparking alarm about growth.

Frankfurt's leading share index, the Dax, spiked upwards on news of the survey's findings.

Ifo's results would appear to support predictions by six leading groups of economic forecasters, Ifo included, that Germany's economy is picking up and will manage 1.7% growth next year.

"This is quite a positive number and better than expected," said Phyllis Papadavid, a Lehman Brothers economist.

Reforms

She found the rise in the part of the survey dealing with future expectations - from 105.2 to 107.9 - "particularly positive".

"It suggests that people are becoming more optimistic about the government's reform effort," she said.

Chancellor Gerhard Schroeder is promoting a package of six bills reshaping welfare and taxation which he says are vital to Germany's recovery prospects.

Mr Schroeder staked his career on winning a parliamentary vote in October on the controversial measures, which included cuts in unemployment benefit.

He won a vote in the lower house, but still has to steer the bill through other parliamentary stages.

Frankfurt's Dax index stock was up 1.3% at 3,562 by late morning.




SEE ALSO:
Germany reduces growth forecast
23 Oct 03  |  Business
Germany proposes pensions freeze
20 Oct 03  |  Business
Schroeder wins key reform vote
17 Oct 03  |  Europe


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