German data sees growing divide

Europe’s largest economy held up strongly during the first two and a half years of a debt crisis that has hammered growth across the bloc, before contracting in the last quarter of 2012 as firms postponed investment and exports suffered.

Economists expect a moderate return to growth in the first quarter of 2013 that is crucial if the wider eurozone economy is going to recover.

“There is a lot of momentum in the confidence rebound in Germany, the unemployment rate remains low and wages are rising,” said Berenberg Bank analyst Christian Schulz.

“Financial markets have been stable too and borrowing costs are very low and are reasons to support the momentum.”

The Ifo business climate index, a key barometer of Germany’s economic health due out on Friday, is seen rising for the fifth consecutive month to 107.6 from 107.4, according to a Reuters poll of 37 economists.

German investor and analyst sentiment, published by the Mannheim-based ZEW institute today, is seen remaining near its highest level in almost three years, albeit easing slightly to 48.0 from 48.2, possibly due to the uncertain outcome of Italy’s elections last month.

But the ‘hard’ data of backward-looking statistics on production, sales and jobs has been mixed.