UPDATE 2-German business sentiment hits record high

* Rise surpasses expectations, highest since 1991

* Ifo says outlook is good for consumption

* German economy leaving weaker euro zone countries behind

(Adds fresh economist comment, detail)

By Paul Carrel

BERLIN, Dec 17 (BestGrowthStock) – German business morale rose to
its strongest level since 1991 in December, buoyed by an
increasingly strong domestic sector that is helping the economy
power ahead of weaker euro zone peers.

The Munich-based Ifo think tank said on Friday its business
climate index, based on a monthly survey of some 7,000 firms,
rose to 109.9 from 109.3 in November. The rise was the seventh
in a row and surpassed expectations for a fall to 109.1 (ECONDE: )

The reading amplified the positive message from other German
data released this week, showing Europe’s largest economy is
leaving behind those weaker members of the euro zone struggling
with a debt crisis. [ID:nLDE6BF0WI]

“The German economy is truly in top form,” said DekaBank
economist Andreas Scheuerle.

“The manufacturing sector doesn’t see the debt crisis as a
burden because Ireland and Greece are such small markets for
German companies,” he added. “At the same time, the depreciation
of the euro is giving companies windfall earnings.”

Reflecting the strength of the recovery, German steelmaker
ThyssenKrupp (TKAG.DE: ) said late last month it saw profit rising
next year, driven by economic growth in Germany and emerging
markets. [ID:nLDE6AT1KN]

Ifo indices on current conditions and expectations both
rose. The expectations index hit a record high, suggesting the
recovery will power on into the New Year.

“The German economy is entering the New Year at full
throttle,” said ING economist Carsten Brzeski.

Another survey released on Thursday [ID:nSLAFNE6KI] showed
Germany’s private sector grew at the fastest rate in 4-1/2 years
in December, when investor sentiment also rose on a brightened
outlook for exports and domestic demand. [ID:nLDE6BD0Z2]

“At this level, the Ifo points to very strong annual GDP
growth of around 6 percent — far better than Q3’s 3.9 percent,
implying that the recovery has further to run,” said Capital
Economics analyst Ben May.

For a graphic on German IFO and bond yields, click on:


Rising domestic investment and private consumption will help
drive the German economy in 2011, Ifo said earlier this week,
raising its forecasts for economic growth this year and next to
3.7 percent and 2.4 percent respectively. [ID:nLDE6BD0ST]

Other economic institutes have this week also raised their
growth forecasts for Germany as the recovery powers ahead.

Their upbeat assessments reflect growing evidence that
Germany’s domestic economy is contributing more to the recovery
as households’ confidence grows. Consumer morale rose going into
December to its highest since October 2007. [ID:nLDE6AM19L]

Ifo economist Klaus Abberger said Germany’s retail sector
was also experiencing strong Christmas trade.

“Business trade went well. The last week however is
extremely important,” he told Reuters.
(Additional reporting by Annika Breidthardt, Stephen Brown and
Sarah Marsh in Berlin, and by Christian Kraemer in Munich;
Editing by Catherine Evans)

UPDATE 2-German business sentiment hits record high