German business confidence rises in June

Bloomberg

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, increased to 85.9 from 84.3 in May. Economists expected a gain to 85, the median of 34 forecasts in a Bloomberg News survey showed. The index reached a 26-year low of 82.2 in March.

Germany’s worst economic slump since World War II may be bottoming out as a global recovery improves prospects for exports.

Manufacturing orders held steady in April after increasing in March and investor confidence rose to a three-year high in June. The coalition government led by Chancellor Angela Merkel, who faces national elections in September, is spending about 85 billion euros ($118 billion) to stimulate growth. Still, the Bundesbank expects the economy to shrink 6.2 percent this year and stagnate in 2010.

"We expect the economy to stabilize and recover in the course of the year," said Joerg Lueschow, an economist at WestLB in Duesseldorf. "We have a very expansive monetary policy, gigantic economic stimulus programs globally and still some relief from the oil price."

The European Central Bank has cut its benchmark interest rate to a record low of 1 percent. It will offer to lend banks as much money as they want for 12 months in a new auction this week to help get credit flowing again. Oil prices have almost halved from their peak last year.

Siemens, Europe’s largest engineering group, this month reiterated sales and earnings targets for the current year and Praktiker, Germany’s second-biggest home-improvement retailer, said last month revenue has rebounded in its domestic market since the end of March.

Germany’s manufacturing and service industries contracted more slowly in May and unemployment rose less than economists forecast.