By Sonja Dieckhoefer
Frankfurt, March 26 (Bloomberg) -- German executives were more confident this month than at any time since May as a revival in the U.S. economy spurs demand for exports, the Ifo institute's survey of 7,000 companies will probably show, economists said. Ifo's index of western German business confidence climbed to 90 from 88.7 in February, according to the median of 22 analysts surveyed by Bloomberg News. The report will be released at 10 a.m., Frankfurt time, today. ``The pendulum is swinging back: The U.S. dragged Germany down, now it's going to pull it out of the recession,'' said Andreas Moeller, an economist at WGZ-Bank in Dusseldorf.
Companies are optimistic Europe's largest economy will grow this year after sinking into its first recession in eight years. E.ON AG, Europe's No. 2 electricity company, said earnings will likely increase this year. Bayerische Motoren Werke AG expects a third year of record profit and sales. ``There is every reason to look for another strong increase in business confidence,'' said Heinz Grimm, chief economist at Bankgesellschaft Berlin. ``Needless to say that other climate indicators clearly support that outlook.'' An index by the ZEW economic institute last week showed optimism among German analysts and institutional investors rose for a fifth month in March. The nation's benchmark DAX stock index has gained a quarter since the Sept. 11 attacks.
Munich-based Ifo, which gets half its money from the government, each month asks some 7,000 executives about orders, inventories, production, prices and jobs. Dependent on U.S.
A recovery across Europe is likely to be fueled by stronger demand from the U.S., companies say. ``The economy will recover in the course of the year, first in the U.S. and then in the European Union,'' Wulf Bernotat, chief executive officer of German logistics company Stinnes AG, told a press conference last week. The U.S. buys almost a quarter of Europe's exports. Industrial production in the world's largest economy rose in February for a second month, a sign manufacturing is starting to recover from a 1 1/2 year slump. U.S. personal spending gained in January. Lagardere SCA, France's second-largest media company, said last week that profit rose 17 percent in 2001, partly fueled by demand for books and magazines. Suess MicroTec AG, a German maker of equipment for computer-chip manufacturers, said it expects ``a considerable increase of sales for 2003.'' Business confidence is likely to rise also in France and Italy, the second and third-largest of the dozen nations sharing the euro is used, analysts said. The Italian report will be released today at 9:30 a.m., Rome time, today. French figures are due tomorrow.
Breuer Sees Tough Year
Some companies said the recovery will take time. Rolf Breuer, chief executive officer of Deutsche Bank AG, said yesterday the lender faces a ``difficult market environment.'' Europe's economy is likely to grow as much as 0.7 percent in the second quarter after expanding as much as 0.4 percent this quarter, the European Commission estimates. The economy shrank in the final three months of last year. The European Central Bank is finished paring interest rates after four cuts last year, futures trading suggests. The implied yield on the three-month Euribor contract due in June climbed 4 basis points yesterday to 3.67 percent, 42 basis points above the ECB's benchmark rate. ECB Vice President Christian Noyer on Friday said the bank has ``nothing more to do'' if the economy recovers as expected.
The central bank's chief economist, Otmar Issing, two days earlier told a European Parliament committee that policy makers expect growth to be ``moderate,'' though there are ``substantial uncertainties regarding the strength of the upswing.''
Unemployment
That's partly because unemployment keeps rising across Europe, weighing on consumer confidence. German jobless rolls gained in February for a 14th month, and the number of people out of work in France increased for a seventh month in January. More jobs are at risks after Philipp Holzmann AG, the 152- year-old company that once was Germany's second-largest builder, on Thursday filed for protection from creditors. Holzmann employs 25,000 people worldwide. German chemical companies may see production rebound in the third quarter, the VCI Chemical Association predicted last week. Still, the group doesn't expect industry sales in 2002 to rise above the year-earlier level.