Key German index delivers nice surprise

Bloomberg

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, increased to 83 from 82.6 in December.

Chancellor Angela Merkel’s coalition this month agreed to spend about 80 billion euros ($105 billion) over two years to stem the worst recession since World War II. The International Monetary Fund expects Germany’s economy to contract 2.5 percent this year.

"The stimulus package and the fall in oil prices possibly brightened sentiment," David Milleker, chief economist at Union Investment in Frankfurt, said before yesterday’s report. "However, the outlook for this year remains extremely negative."

Biggest stimulus
The government’s spending plan amounts to about 1.6 percent of gross domestic product, making it the biggest stimulus program in Europe. The cost of crude oil has dropped almost 70 percent from a July peak of $147 a barrel, increasing consumers’ and companies’ purchasing power.

Still, the recession has damped export demand, prompting companies to curb production and cut jobs.