German business confidence dropped for the sixth consecutive month in November, although there is hope that the situation is stabilising enough to head off recession, according to a leading business index.
The results will put further pressure on the European Central Bank (ECB) to cut interest rates when it meets next week.
The Ifo business confidence index dropped to 87.3 from 87.7 in October, according to the Ifo research institute in Munich. The index is compiled from surveys of 7,000 company managers, asking them to rate the outlook of orders and investment for the next six months.
This month's survey showed a continuing pessimism towards the future, but growing optimism about current business performance, according to the Ifo institute.Managers judged their confidence about the current situation to be better for the third month in a row.
"Companies realise that things are not getting worse, but they are not quite ready to see the future getting brighter," said Mr Gernot Nerb, the chief economist at Ifo.
"This is a situation we have sometimes seen close to the bottom of a downswing...It's still very fragile. They're not convinced that this positive trend will continue, and a lot of companies are still sceptical," he said.
"The rise is confidence about the current situation an unexpected, but welcome sign," said Mr Hans-Werner Sinn, head of the Ifo institute.
"The economy is in a better shape than the expectations of many people suggest."
Despite the mixed signals in the survey the German government will be hoping for relief from the governing council of the European Central Bank (ECB) next month in the form of a cut in interest rates, currently at 3.25 per cent.
Despite the occasional ray of sunshine in yesterday's Ifo report, the economic forecast in Germany is overcast. Managers are still pessimistic about future prospects, as can been seen in the drop in that index 95.8 from 97.9. This month's confidence drop was almost entirely due to a drop in the future prospects of German manufacturers.
The eastern German states remain a problem area, with the index of business confidence in the east falling to 95.0 from 97.8 in October.
The Ifo report contained little cheer for Mr Hans Eichel, the finance minister, who has been hoping for an upturn for months. Germany's budget deficit has already breached the three per cent ceiling set down in the Growth and Stability Pact.
Meanwhile Italian business confidence rose unexpectedly in November. The ISAE research institute said that business confidence rose to 95.4, from 95.2 in October when seasonally adjusted.
The US economy grew faster in the third quarter than first reported, and consumer confidence rose from a nine-month low after five months of decline, according to upbeat figures released yesterday.
However, other reports showed declines in home sales and an increase in job-cut announcements.
US gross domestic product grew at a seasonally adjusted annual rate of 4 per cent from July to September, the Commerce Department said. It was the second highest growth recorded in two years beating an initial estimate of 3.1 per cent, reported late last month, and the previous quarter's anaemic 1.3 per cent growth.
Sharp jumps in car sales and growth in government spending were key contributors.
