German business confidence index revives after sharp drop

By TONY CZUCZKA
Associated Press Writer

BERLIN – A key index of German business sentiment edged up in November after hitting eight-year lows in the wake of the Sept. 11 attacks on the United States.

The Ifo institute said Monday its index, based on a survey of executives at 7,000 companies, revived to 84.9 in November from 84.7 in October.

Ifo economist Gernot Nerb said the increase was the first sign of stabilization for Europe's biggest economy since Sept. 11, but that it was too early to talk of a recovery. The institute's index of businesses' expectations for the next six months also rose, to 90.9 in November from 89.6 in October.

"It's a first sign that the downswing is slowing down," Nerb said.

The German economy shrank in the third quarter, which ended in September.

In the wake of the Sept. 11 attacks in the United States, the monthly business climate index fell to 85.0 in September from 89.5 in August – the biggest one-month drop since the Arab oil embargo of 1973.

Economists watch the Ifo survey closely for clues on how managers are likely to view spending on new purchases, facilities and workers that could stimulate the economy.

The German economy has slowed dramatically since expanding by a healthy 3 percent in 2000. Growth was just 0.4 percent in the first quarter and flat in the second. In the July-September period, the value of goods and services produced in Germany slipped 0.1 percent from the previous quarter, the first decline in more than two years.

Economists expect a further contraction across Europe in the closing quarter of this year, led by Germany, which accounts for about a third of economic activity in the 12 countries using the euro. Two quarters of negative growth is the usual definition for recession.

The slowdown, which started before Sept. 11, has forced Chancellor Gerhard Schroeder to concede he won't meet election pledges on cutting joblessness.

AP-WS-12-17-01 1354EST