28 January 2003, 10:38  German Business Confidence Probably Rose in January (Update1)

Frankfurt, Jan. 28 (Bloomberg) -- German business confidence probably rose for the first time in eight months in January as companies expect a global economic recovery to boost exports, analysts said in advance of an industry report. The Ifo economic institute's index of western German business confidence increased to 87.5 from December's 11-month low of 87.1, according to the median forecast of 31 economists surveyed by Bloomberg News. Industrial production, factory orders and exports all rose in November, according to figures released this month. The German economy grew at the slowest pace in almost a decade in 2002. In the U.S., destination of a fifth of Europe's exports, manufacturing gained the most in 11 years in December. ``Siemens will have an all-right year,'' said Heinrich von Pierer, chief executive officer of Siemens AG, the country's largest corporate employer, said in an interview. ``We will participate in the upswing in Asia and the U.S. economy will also grow.'' Munich-based Ifo, which gets some of its money from the government, each month asks about 7,000 companies about orders, production, inventories and employment. The index peaked at 107.4 in November 1990. The low was 76.7 in 1982. It is scheduled to publish its January index at 10 a.m. Frankfurt time.
`Exceptionally' Good Business
Hochtief AG, Germany's largest builder, expects earnings to increase this year amid ``exceptionally'' good business in the U.S., the company's biggest market, Chief Executive Officer Hans- Peter Keitel said in an interview. ``We'll certainly do better this year than we did in 2002.'' The U.S. economy probably grew at a 1 percent annual rate in the fourth quarter, after 4 percent in the previous three months, economists said the Commerce Department will report Thursday. That compares with 0.2 percent growth in Germany last year. Durable goods orders and Chicago-area manufacturing will probably show this week that the economy started picking up heading into 2003, analysts said. An index designed to predict the direction of the U.S. economy rose for a third straight month, supporting forecasts that growth may speed up by mid-year. China's economy expanded 8 percent last year. Growth will cool to 7.7 percent this year, according to the median forecast of eight economists polled by Bloomberg News.
Possible Contraction
Still, concern about a possible U.S.-led war with Iraq has pushed down share prices and the dollar, and boosted oil prices. The cost of oil increased 44 percent last year. The European Union said the $7 trillion economy of the dozen nations sharing the euro may contract this quarter after growing at the slowest pace in almost a decade last year. ``There's going to be a continuing slowdown in Germany,'' Michael Burda, an economics professor at Berlin's Humboldt University, who may become an adviser to Chancellor Gerhard Schroeder's government, said in an interview. ``I think there's going to be another recession.'' Altana AG, the German drugmaker owned by the billionaire Quandt family, said Monday the euro's 26 percent gain against the dollar in the past 12 months may prevent sales and profit from rising more than 10 percent this year. ``So far one can still live with the euro but if this development continues it won't help Germany's outlook for economic growth,'' von Pierer said. Siemens, Germany's largest electronics and engineering company, generates about a quarter of its sales in the U.S., the company' biggest single market.
ECB Expects Recovery
A 2.9 percent increase in exports, which account for about a third of Germany's gross domestic product, helped the economy avoid contraction last year. German retail sales fell the most in more than three years in November. Germany's benchmark DAX Index has fallen 9 percent this year, and Europe's Dow Jones Stoxx 50 Index is down 11 percent. The DAX lost 44 percent last year, the biggest drop among the world's 74 benchmark indexes tracked by Bloomberg. European Central Bank policy makers have said they still expect growth in the dozen countries using the euro to accelerate to near 2 percent to 2.5 percent this year, as slowing inflation and cheaper credit spur spending. The ECB pared credit costs half a percentage point to 2.75 percent on Dec. 5. The rate on a three-month euro deposit maturing in June, which reflects investors' interest rate expectations, rose 2 basis points today to 2.49 percent, compared with a three-month money market rate of 2.81 percent. A basis point is 0.01 percentage point. It's ``premature to already write off 2003,'' ECB Chief Economist Otmar Issing said in an interview at the World Economic Forum. ``Economic growth will recover in the course of the year after a moderate start.'' Nexans SA, the world's largest maker of cable, will probably break even this year after posting a loss last year, Chief Financial Officer Frederic Vincent said Monday. RTL Television, the German unit of Europe's biggest broadcaster, said earnings in 2002 were better than it expected as cost-cutting took effect. //www.quote.bloomberg.com

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