German confidence bouncing back

March 26, 2002 Posted: 10:13 AM EST

German businesses are confident the economy will continue growing

FRANKFURT, Germany - German business confidence continued to grow in March, reaching pre-September 11 levels -- a confirmation that Europe's biggest economy is rebounding from a recession.

Germany's key economic barometer, the Ifo monthly survey of 7,000 western German companies, rose to a stronger-than-expected 91.8 points, up from a revised 88.5 in February and marking the fifth consecutive monthly increase in business confidence.

The March number, which beat forecasts of 90.3 points, is the highest since April 2001.

Ifo's other main yardstick, its business expectations index, rose to 106.3 points, up from 101.0 in February, its highest level since mid-2000. The index measures companies' outlook for the next six months.

"The improvement is almost entirely a result of better business expectations for the coming months,'' Ifo President Hans-Werner Sinn said Tuesday.

Analysts were also were upbeat about the March numbers, with most expecting the improved business climate to translate into economic growth in 2002.

"We will see positive growth in the first half of this year and stronger growth in the second half," Ralph Solveen. an economist at Commerzbank, told CNN.

Germany slipped into recession in the last quarter of 2001. However, the Finance Ministry has said it expects economic growth this year of 0.75 percent this year, compared with 0.6 percent in 2001.

It said the economy should grow by 3 percent next year for the first time since 2000.

The improving economy could put pressure on the European Central Bank to raise its key interest rate if inflation becomes a concern. The ECB's next rate-setting meeting is on April 4, but most analysts expect the central bank to keep its rate on hold until the end of this year.

"There are not very big inflation threats at the moment," Solveen said.

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