UPDATE 2-German business morale hits 3-yr high

* Ifo climate index surprises, highest since June 2007

* Ifo current conditions index rises, expectations fall

* Euro rises to session high after data

* Ifo economist: Germany healthy, not immune to dips abroad

(Adds details, background)

By Annika Breidthardt

BERLIN, Aug 25 (BestGrowthStock) – German business morale rose to
its highest in more than three years in August, an unexpected
gain that boosted confidence Europe’s largest economy will keep
growing even if others slip back into recession.

The Munich-based Ifo think tank said on Wednesday its
business climate index rose to 106.7 from 106.2 in July, the
third rise in a row and beating the mid-range forecast in a
Reuters poll of 42 economists for a fall to 105.7. (ECONDE: )

“It’s incredible but it’s also wonderful the way things are
going at the moment. It’s hard to imagine it going beyond this,”
Andreas Scheuerle of Deka Bank said.

“The air is getting thin for any further increases in the
business climate index.”

The data, a fresh illustration of the extent to which the
euro zone relies on Germany as its engine of growth, drove the
single currency to a session high against the dollar, while
German Bund futures extended losses. [ID:nLDE67O0EZ]

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For a graphic showing German IFO and PMI, double-click on
http://r.reuters.com/jux96n

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RISKS FROM ABROAD

An Ifo index on current conditions rose to 108.2 from 106.8
in July but another on expectations fell to 105.2 from 105.6, in
a further sign that growth would likely slow somewhat.

Ifo economist Klaus Abberger joined the ranks of those
saying growth would not continue as strongly in the second half,
saying Germany’s economy was in healthy shape but not immune if
the United States were to slip back into recession or Asian
growth were to slow. [ID:nLDE67O0MN]

“There is a growing confidence in the upturn and that’s
having a positive effect on consumption,” he told Reuters. “The
risks are from abroad.”

Surging exports and a return to higher levels of consumer
spending powered the German economy to growth of 2.2 percent in
the second quarter this year, the highest rate in 20 years and
generating a broad-based recovery.

Abberger said the German economy could post growth of 3
percent this year, in line with a forecast from the Bundesbank
last week. He expected domestic consumption to grow slightly
over the full year. [ID:nLDE67I1CW]

France and some other euro zone countries had criticised
Germany for relying too much on exports and not doing enough to
stimulate domestic demand, from which its peers could benefit.

In contrast to Germany, France grew by just 0.6 percent in
the second quarter and the French government last week cut its
2011 growth forecast to 2 percent. The euro zone as a whole grew
1 percent while the Greek economy contracted sharply.

In the United States, the risks of a double-dip recession
have risen in the last six months, Chicago Federal Reserve Bank
President Charles Evans said on Tuesday.

Germany’s leading businesses are a good mirror for the
country’s economic strength. Of the 30 companies in the bluechip
DAX index, 23 beat market expectations with their earnings in
the quarter to end-June and 12 hiked their outlooks.

Bellwether Siemens (SIEGn.DE: ) broke a streak of nearly two
years of declining sales and raised its outlook in July, helped
by rising emerging market demand and a weak euro.
[ID:nLDE66R21N]

German flagship carrier Lufthansa (LHAG.DE: ) said on
Wednesday its business had developed strongly in recent months.
[ID:nLDE67O0K2]

Companies are also hiring again. Unemployment fell to 7.6
percent in July.

The Ifo results are based on a monthly survey of some 7,000
firms.

(Additional reporting by Christian Kraemer in Munich and
Paul Carrel, Erik Kirschbaum and Brian Rohan in Berlin)

(Reporting by Annika Breidthardt; graphics by Scott Barber;
Editing by John Stonestreet)

UPDATE 2-German business morale hits 3-yr high