Germans turn their backs on recession fears

Written by The Financial Times | Updated: Dec 29 2011, 08:26am hrs
By James Wilson in Frankfurt

German companies expect more investment and job creation in 2012 in spite of uncertainty in the eurozone, according to a survey of the corp-orate sector.

The relatively upbeat mood highlighted by DIHK, Germanys chamber of commerce and industry, reflects

a belief that Europes largest economy will escape recession in 2012, even though growth prospects have deteriorated and austerity in neighbouring countries casts doubt on demand for exports.

Almost one in three companies expects to increase investment in the next 12 months, while one in five plans to expand its workforce. More companies said they expected to be expanding than reported an intention to cut investment and staff.

Germanys economic strength has remained almost unaffected by the eurozone crisis. The unemployment rate continues to fall. Last month the Ifo index of Germanys business climate showed an unexpected rise.

Philipp Rsler, deputy chancellor and economy minister, told Handelsblatt newspaper yesterday that companies were confident of the future. Our economy is extremely robust, even if the international and European economic environment has become more difficult, he said.

In the same newspaper Wolfgang Franz, the head of a panel of independent economic advisers to the government, said companies were feeling no signs of recession. He criticised Christine Lagarde, managing director of the International Monetary Fund, for warning of dangers to the world economy.

It is right to point to the risks . . . but one can also talk oneself into a recession. Mrs Lagarde would be well advised to be more circumspect in her choice of words, Mr Franz said.

Many forecasts of German growth next year are being revised as the crisis has gone on. Mr Franz said the economy should grow 0.5 per cent in 2012, cutting his panels forecast of 0.9 per cent, made in November.

More than half the companies in the survey said their situation remained good, virtually unchanged from the summer in spite of a sharp increase in eurozone tension.

Nevertheless, companies outlook for 2012 has become cautious. While more companies remained optimistic than pessimistic about the outlook for exports and their business over the next 12 months, the overall level of confidence in the outlook fell to its lowest in more than two years, and below the average of the past decade, the DIHK said.

Still, the DIHK said there were no grounds to fear a swansong for exports. German companies are not dependent on just one market. In the growth regions of Asia, Latin America and in parts of eastern Europe the drivers of growth are still intact, it said.

Its survey included responses from about 9,000 companies that are members of 80 local chambers of commerce.

The Financial Times Limited 2011