Business confidence in Germany, Europe's largest economy, probably rose for the first month in three in July as exports helped the recovery gain pace, a survey of economists showed. The Ifo institute's confidence index may have climbed to 95 from 94.6 in June, according to the median of 41 forecasts in a Bloomberg News survey. The index, based on a survey of 7,000 executives, touched a three-year high of 97.5 in January. In Italy, executive optimism probably also improved for the first month since April, a separate survey showed. Companies including Siemens AG are relying on a global recovery, fueled by the U.S. and China, to drive sales as Germany's 9.8 percent unemployment rate, the second-highest in the euro region, discourages consumer spending. Wincor Nixdorf AG, Europe's largest maker of cash registers, yesterday raised its full-year profit forecast as rising U.S. demand overcame falling domestic sales.
``The recovery is very much export-led,'' said Ian Stewart, chief European economist at Merrill Lynch & Co. in London. ``In all likelihood, there will be no serious improvement in domestic consumption until next year.'' In Italy, the Isae institute's index of business confidence probably rose to 94 from 93.6 in July, according to the median of 24 forecasts. The Rome-based group's report will be published at 9.30 a.m. The Munich-based Ifo will release its report half an hour later.
European Growth
Germany is helping fuel growth in the economy of the dozen euro nations, which the International Monetary Fund says will reach a four-year high of 1.7 percent this year. Belgian business confidence, regarded by some economists as a benchmark for Europe, jumped this month to the highest since November 2000, the country's central bank said yesterday. Siemens, the world's second-largest turbine maker, will probably say on Thursday that second-quarter sales rose for the first time in two years, and DaimlerChrysler AG, the world's No. 5 carmaker, may report that profit rose almost sevenfold, according to surveys of analysts. Faster global growth is prompting economists to reappraise their expectations for Germany's economy. Chancellor Gerhard Schroeder's council of advisers last week raised its German growth forecast for 2004, joining at least four of the country's six state- funded leading economic institutes. ``Every week someone is revising their forecasts upward and that alone will help people's expectations'' for growth, said Ralf Solveen, an economist at Commerzbank AG in Frankfurt.
Lid on Spending
Unemployment at the highest in five years may keep a lid on consumer spending. KarstadtQuelle AG, Germany's largest department- store company, said July 3 it will shed 4,000 jobs by 2006 amid waning demand at home. Global growth may have peaked, some economists say, damping companies' earnings prospects. U.S. retail sales fell in June by the most since February 2003, while Chinese economic growth unexpectedly slowed in the second quarter. JCF Group, a compiler of analyst surveys, estimates that profit among the euro region's 600 biggest companies may shrink by 1 percent on average in the third quarter from the second. ``The tendency of the world economy is for growth to be a little slower,'' said Solveen. ``That will have a negative impact on Germany.''
Oil Impact
Rising oil prices may reduce companies' profit margins and weigh on hiring. Volkswagen AG, Europe's largest carmaker, last week cited higher energy costs as one of the reasons for cutting its 2004 earnings forecast. The price of crude has climbed 35 percent in the past year, rising to as high as $38.50 per barrel yesterday. Still, executives' assessment of euro region growth may improve after workers at companies including DaimlerChrysler AG agreed to longer working hours and wage curbs. Thomas Cook AG, Europe's second-biggest tourism company, said 2,000 staff agreed to work longer. A month ago, 2,000 Siemens employees agreed to extend their work week after the company threatened to shift production to Hungary. ``A lot of companies are going to go in this direction,'' said Christoph Hausen, a senior economist at Gothaer Asset Management in Frankfurt. ``The Daimler agreement has had an impact on the debate about Germany as a place to do business.'' //www.bloomberg.com