• Transcript

    German business morale improved unexpectedly in March after six consecutive drops, a survey showed on Monday, suggesting that Europe's largest economy is likely to pick up in the coming months after it narrowly avoided a recession last year. Pascale Davies reports.
    A welcome surprise from Europe's economic powerhouse.

    German business morale improved this month after six consecutive drops and had a narrow escape from recession last year.

    That's according to an Ifo survey that said Germany's business climate index rose to a reading of 99.6 from an upwardly revised 98.7 the previous month.

    It also predicted the overall economy would grow 0.6 percent this year.

    But it could be too soon to talk about a turnaround.

    (SOUNDBITE) (German) IFO PRESIDENT, CLEMENS FUEST, SAYING:

    "The economy is currently divided: there is a strong domestic sector, employment is rising, salaries are strongly increasing, the state is spending money which supports the economy. What's not going well are exports. The industry is experiencing problems and figures are dropping."

    Exports, a main driver of Germany's economy.

    But Brexit uncertainty and threats from the U.S. to increase tariffs on cars and auto parts imported from the EU have caused a double whammy of worry to growth.

    (SOUNDBITE) (German) IFO PRESIDENT, CLEMENS FUEST, SAYING:

    "The question is what politicians can do. I think they should not launch any short-term economic programmes and they should think more about the economy's growth direction.

    For now though, Germany's rise in business sentiment has taken the edge off market fears for the bloc.

    The euro, government bond yields, and stocks in the eurozone rose on the news as the chances of Europe's biggest economy sliding into a recession narrows.