Morale is running high among French and German industrials, shows a survey led by the French statistics agency Insee.
German and French executives surprised analysts Wednesday with an upbeat view of current business conditions despite gathering storm clouds in the global economy and mounting fears among European neighbours.
Business confidence indices reflected the sunny disposition of industrial leaders in the two countries.
In a closely watched German business climate index, calculated each month by the Munich-based economic research institute Ifo, the March reading climbed to 104.8 points from 104.1 points in February, beating economist expectations.
Meanwhile, the monthly index of French industrial confidence by the official INSEE statistics body rose by two points to 109 despite strains and signs of slowing growth in the world economy.
Both seemed to buck a global trend marked by ongoing turbulence on financial markets, the slowdown of the US economy, high energy prices and the strength of the euro against the dollar which crimps Eurozone exports.
Analyst Andreas Rees at UniCredit said German exporters, the backbone of Europe's biggest economy, appeared to be shrugging off the crises.
"German companies are currently giving the impression of a supernatural and hence imperturbable species -- a mixture between Superman and Batman," he said.
Global Equities analyst Marc Touati felt prompted to ask: "Are French industrialists on Prozac (antidepressants)?"
Yet other eurozone nations are refusing to join the party.
Business confidence among Italian manufacturers fell to the lowest level since August 2005, according to another report published Wednesday.
Others have been cautious too on the European outlook.
The International Monetary Fund official for Europe said last week that while the continent was not threatened by recession at the moment, the IMF planned to cut its growth forecast for the region.
The Organisation for Economic Co-Operation and Development last week forecast only tepid growth in the eurozone economy of 0.5 percent in the first quarter and 0.4 percent in the second.
The German economy, however, appears to be weathering the storm well -- the order books are full, demand for German products in emerging markets appears unabated and the financial sector has seen only marginal fallout from the US subprime home loan crisis.
Meanwhile French Economy Minister Christine Lagarde said robust domestic demand was driving continued growth.
Economist Sylvain Broyer at Natixis said the bullish German and French business indices gave the European Central Bank grounds for confidence.
"Even if stable business confidence does not mean that the eurozone economy is unaffected by the global turmoil, today's readings are for sure good news for the ECB," he said.
"In such a context, the European Central Bank can wait before easing monetary conditions, probably until June ... when hard data will have shown the entire scope of the slowdown.
"We expect sluggish growth this year, with eurozone gross domestic product rising by 1.5 percent ... but no lasting stagflation and no recession."
But UBS analyst Martin Lueck said Wednesday's cheery outlook may be shortlived, with the impact of the US crisis simply taking its time to be felt.
"In fact, a prolonged period of business conditions improving in Germany/Europe and deteriorating in the US would be rather unusual," he said.
"We have to keep in mind that there is usually a time lag of some one to three quarters between the US and European business cycles, and as the US economy (was) doing pretty well until the end of 2007, it is no surprise that Europe is hardly showing any signs of weakening yet."
Date created : 2008-03-26