by Alessandro Speciale |1:01 AM PST | February 23, 2015
(Bloomberg) -- German business confidence rose for a fourth month as faster economic growth and optimism over European Central Bank stimulus outweighed fears of a worsening Greek crisis.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, advanced to 106.8 in February from 106.7 in January. The median estimate of 37 economists in a Bloomberg News survey was for an increase to 107.7.
Growth in Europe’s largest economy is accelerating amid lower oil prices and a weaker euro, and Germany’s Bundesbank plans to increase its forecasts for 2015. With the ECB set to start buying 60 billion euros ($68 billion) a month of debt to bolster the euro-area economy, the risk of a Greek default and exit from the union hasn’t weighed much on business sentiment.
The report signals that “German businesses never feared a full escalation of the Greek crisis or were at least not afraid of a Grexit,” said Carsten Brzeski, chief economist at ING-DiBa AG in Frankfurt. “Improved expectations signal a strong belief in the benefits of the ECB’s quantitative easing.”
A measure of current conditions dropped to 111.3 in February from 111.7 the previous month, the Ifo report showed. A gauge of expectations climbed to 102.5 from 102.
The euro extended its decline and was down 0.5 percent at $1.1324 at 10:07 a.m. Frankfurt time. Germany’s DAX Index of stocks was up 0.5 percent at 11,103.
Greece’s wrangling over its bailout package, which could see the government unable to finance itself, still clouds the outlook for Europe. Prime Minister Alexis Tsipras has until the end of Monday to complete a list of policies in return for continued funding from international creditors. European Union finance chiefs will then decide whether the proposals go far enough or need another round of emergency negotiations.
In Germany, manufacturing grew and services picked up pace in February, according to a Purchasing Managers Index by Markit Economics. Rheinmetall AG, a maker of car parts and defense equipment, reported 2014 profits exceeded its estimates because of record earnings at the auto-components unit.
The Bundesbank said on Feb. 16 that 2015 growth will probably exceed its December forecast of 1 percent. The European Commission this month forecast 1.5 percent.
German investor confidence rose to the highest level in a year in February, buoyed by the imminent arrival of fresh central-bank stimulus, a report by the ZEW Center for European Economic Research in Mannheim showed last week.
The ECB will start its 1.14 trillion-euro bond-buying program in March as it seeks to avoid a deflationary spiral in the euro area. The plan was opposed by the German members of the Governing Council, Jens Weidmann and Sabine Lautenschlaeger, who said lower energy costs and existing measures are already providing stimulus.
“We do see significant potential for a larger step-up in German growth,” said Greg Fuzesi, an economist at JPMorgan Chase & Co. in London. “Growth may even accelerate a bit further as commodity prices reach their lows in the current quarter and the growth contributions from the currency and sentiment rise.”
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