* Ifo index rises for fourth straight month
* Economists say survey points to economy picking up
* Companies slightly less upbeat on future
By Michelle Martin
BERLIN, Feb 24 German business morale rose in
February to its highest level since July 2011, suggesting
Europe's largest economy will grow faster in the first quarter
after expanding only modestly last year.
The Munich-based Ifo think tank's business climate index,
based on a monthly survey of some 7,000 companies, increased to
111.3, beating the consensus forecast in a Reuters poll that it
would hold steady at 110.6. Economists said the survey pointed
to an economic upturn.
"February's German Ifo survey suggests that the economic
recovery has continued to pick up some momentum in the early
months of 2014," said Jonathan Loynes, the chief European
economist at Capital Economics.
The upbeat reading sent the euro to a day's high and pushed
German Bund futures down to a session low.
German sentiment indicators have generally been upbeat in
recent months, though a ZEW survey last week showed morale among
analysts and investors dropping.
Hard data have been more subdued, with exports, industrial
output and orders all falling in December. That has prompted
some economists to warn that the economy is not faring as well
as the forward-looking "soft" surveys suggest.
Loynes said the Ifo survey had been "consistently
over-optimistic" compared with hard data. Combined with a drop
in expectations, he said, that supported the case for "steady
but unspectacular" growth in Germany.
GOOD SIGNS FOR DOMESTIC DEMAND
While Germany powered ahead early on in the euro zone
crisis, its performance weakened over the last two years, and in
2013 it grew at its slowest pace since the global financial
crisis. But Berlin expects 1.8 percent growth this year, with
domestic demand compensating for weak foreign trade.
The Ifo survey contained some positive signs in that regard,
with retailers becoming the most upbeat about their current
business situation since spring 2012. Their expectations also
That tallies with the latest GfK survey, which showed
consumers were their most upbeat in 6 1/2 years heading into
February. Consumer spending is up - many Germans won strong wage
hikes last year, employment is at record levels, and inflation
is moderate, while low interest rates are discouraging them from
Ifo economist Klaus Wohlrabe said consumption remained the
bulwark of the German economy, with strong orders in the
manufacturing sector a key pillar of support.
The domestic economy propelled growth last year, but a
detailed breakdown of fourth-quarter gross domestic product
(GDP), due out on Tuesday, is expected to show public
expenditure was stable and private consumption slightly below
its third-quarter level.
Companies were the most positive about current conditions in
almost two years, but they became slightly more downbeat about
their future prospects.
"German businesses are optimistic but not euphoric,"
Wohlrabe said, adding that the euro zone recovery would have an
impact in the medium term but not in the next couple of months.
He said the export outlook was hit by turbulence in emerging
markets, which made firms more cautious.
Some companies have expressed optimism of late, with steel
distributor Kloeckner & Co saying the year's first
few weeks went well and fashion house Hugo Boss
saying it is confident of stronger growth this year.
Manufacturers, who had a weak start to 2013, became more
optimistic overall for a fourth consecutive month, though they
were slightly more gloomy about their export prospects.