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To: Michael M who wrote (3045)	2/21/2001 7:37:06 AM
From: zbyslaw owczarczyk	Respond to of 3891

German business confidence rose in January !!!!! Munich, Feb. 21 (Bloomberg) -- German business confidence rose in January for the first time in eight months amid tax cuts and signs that Europe's largest economy may be able to weather a slowdown in the U.S. The Ifo research institute's index of business confidence in western Germany, which polls 6,000 companies, rose to 97.5 from a revised 96.8 in December. Economists had expected a decline. The index of future expectations fell in January. ``There is an overall improvement in the economy mainly from the new tax regulations,'' said Erich Baumgaertner, chief financial officer of Rational AG, the world's biggest maker of industrial stoves. ``It's good for companies because there is more income available to invest and buy things.'' The German government last year agreed to tax cuts worth 63 billion deutsche marks ($29.5 billion) through 2005. Some of the reductions took effect in January. Higher factory orders and industrial production in December also boosted confidence. It's the same story for much of the euro-zone, which sells about 13 percent of its products to customers in the U.S. Reports last week showed Italy's economic growth accelerated last quarter while French manufacturers said they plan to increase investment. ``We're seeing no major evidence of a slowdown in the euro region,'' said said Francesca Fornasari, a currency economist at Lehman Brothers International. The euro made its biggest one-day gain this week after the report was released. Europe's common currency rose to 91.60 U.S. cents, from 90.94 late yesterday, before trading at 91.44. ECB Standing Ground The gain in business confidence last month suggests the European Central Bank won't cut interest rates anytime soon. Investors, who last month were counting on the European Central Bank cutting borrowing costs in the first quarter, have been scaling back their bets. The spread between three-month money market rates and the March interest-rate future contract narrowed to 7 basis points from 27 basis points on Jan. 8, when rate-cut expectations were strongest. Bundesbank President and ECB Council Member Ernst Welteke said on Monday that there's no convincing case for a rate cut now. He echoed those remarks yesterday, saying that the risk of rising prices hasn't disappeared. The ECB hopes the U.S. slowdown won't damage the euro-zone economy, as only 13 percent of euro-zone exports go to the U.S. and tax cuts in several euro-area nations, including Germany, should boost spending at home. Industrial production in the euro zone rose a faster-than- expected 2 percent in December, a report said yesterday, suggesting that the U.S. slowdown has yet to spill over to Europe. Some Worries Still, the Ifo institute's index of executives' future expectations fell to 100.3, extending its decline from 108.6 in May. Among the companies that remain worried about U.S. growth decelerating to the slowest pace since 1995 in the fourth quarter is Steag Hamatech AG, a German maker of audio and video discs. It said on Friday slower U.S. business contributed to orders halving in 2000 and sales falling 23 percent from 1999. ``We will need to work hard to improve efficiency and reduce costs as the market environment becomes less supportive,'' German carmaker Volkswagen AG said yesterday. The Bundesbank earlier today said Germany's economy grew at the slowest pace in a year and a half last quarter, rising 0.25 percent, only half the rate forecast by the government statistics office last month. Exports Exports from Germany declined 12 percent in December, the biggest decline since April, and retail sales fell for a fourth consecutive month, reports showed last week. Unemployment rose in January for the first time in more than three years, damping hopes sales at home will pick up this year. Kaufring AG, a German retailer and wholesaler, said on Friday full-year sales dropped 33 percent after it closed five department stores. Keramag Keramische Werke AG, a maker of bathroom fixtures, also said profit and sales fell in 2000, citing lower spending on construction. An index measuring Western executives' view of current conditions rose to 94.6 from a revised 92.2. In eastern Germany, which accounts for about 10 percent of the German total, business confidence rose to 106.6 in January from 105.2. Munich-based Ifo asks executives each month about production, inventories, orders, prices and employment. Many analysts regard the index, which is based on responses from some 6,000 executives, as the best gauge of where the euro region's economy is headed. ©2001 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.