German business confidence rose to 17-month high in December as the global recovery triggered a rebound in in exports and manufacturing growth. The business climate index ndustry and trade, rose to 94.7 from 93.9 in November - - the highest since July 2008.

The current business situation, according to the survey responses, is again somewhat more favourable than in the previous month. The business outlook for the coming half year has been assessed similarly as in November. The optimistic and the sceptical outlook assessments nearly balance out.

"After the dramatic economic collapse last winter, these survey results should bring some Christmas cheer," commented Prof. Hans-Werner Sinn, president of the Ifo Institute for Economic Research at the University of Munich.

In manufacturing the business climate has further improved, after having clearly brightened in November. The manufacturers are less dissatisfied with their current business situation than in the previous month. Despite this improvement, the business situation is still worse than after the attacks of September 11, 2001. The business expectations for the coming six months are somewhat more reserved. Export business, however, will take a more positive development in the coming months, in the appraisal of the exporting firms. The personnel plans of the manufacturing firms are again less strongly geared to staff reductions.

In wholesaling and retailing the business climate index has once again improved. Retailers are more dissatisfied with their current business situation than in the previous month, but they are clearly less sceptical regarding the six-month business outlook. In wholesaling present business conditions are more favourable than in November. The business expectations of wholesaling firms are still dampened, however.

The business climate in construction has brightened slightly. The surveyed firms are less dissatisfied with their current business situation than in the past month. They have assessed the business outlook for the coming half year with similar restraint as before.

The Ifo Business Climate Index is based on ca. 7,000 monthly survey responses of firms in manufacturing, construction, wholesaling and retailing. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterise their situation as “good”, “satisfactorily” or “poor” and their business expectations for the next six months as “more favourable”, “unchanged” or “more unfavourable”. The balance value of the current business situation is the difference of the percentages of the responses “good” and “poor”; the balance value of the expectations is the difference of the percentages of the responses “more favourable” and “more unfavourable”. The business climate is a transformed mean of the balances of the business situation and the expectations. For calculating the index values the transformed balances are all normalised to the average of the year 2000.

Ifo Business Climate in the Services Brightens

The Ifo Business Climate Indicator in the German service sector has also risen in December, reaching a new high for the year. The surveyed service providers have assessed their current business situation clearly more favourably than in November. In addition, they have given somewhat more positive appraisals of the six-month outlook. Personnel plans are also no longer as restrictive as in the previous month.

The Ifo Business Survey in the Services is based on ca. 2,500 monthly survey responses of firms in important, especially business-oriented segments of the tertiary sector (excl. distribution, financial services, leasing, insurance and government). The indicator for the Business Climate in the services has not yet been incorporated into the Ifo Business Climate Index for industry and trade.