(Adds Bundesbank report)
By Maria Martinez
BERLIN, April 24 (Reuters) - German business morale rose
slightly in April due to an improvement in companies'
expectations, adding to positive signs as Europe's largest
economy hopes to have dodged a winter recession, a survey showed
on Monday.
The Ifo institute said its business climate index stood at
93.6 following a revised reading of 93.2 in March. The increase
was weaker than expected, with a Reuters poll of analysts
pointing to an April reading of 94.0.
The German economy is likely to have expanded in the first
quarter on a rebound in industrial production, the Bundesbank
said in a monthly report on Monday, revising its previous
forecast for a small contraction.
"German business worries are abating, but the economy is
still lacking momentum," Ifo's president Clemens Fuest said.
Economic momentum in Germany is likely to remain weak for
the time being, said Ulrich Wortberg, senior economist at German
bank Helaba. "At least a recession should be avoided, and we
expect a gradual recovery in the course of the year," he added.
The recent banking problems triggered by Credit Suisse and
the bankruptcy of Silicon Valley Bank appeared not to
have spilled over into the real economy.
"Banking turmoil has had no impact on business sentiment,"
Ifo's economist Klaus Wohlrabe said. "Contagion effects have
failed to materialise."
While companies' expectations improved, they assessed their
current situation as slightly worse, the institute said.
"This combination nicely illustrates that lower wholesale
gas prices and the reopening of the Chinese economy have boosted
economic confidence but that the German economy is still far
away from strong growth," ING's global head of macroeconomics
Carsten Brzeski said.
High employment should also keep supporting consumption, and
unemployment is likely to fall slightly in the coming month,
according to the Bundesbank.
But the outlook is still mixed as inflation continues to
weigh on consumption and the reversal in underlying price
pressures has yet to work its way through to consumers, the bank
added.
"Recent wage settlements, like last weekend's agreement in
the public sector, will offset the loss in purchasing power but
only partly and only gradually," Brzeski said.
German public sector workers agreed on a wage deal with
employers on Saturday, ending a dispute affecting around 2.5
million workers that has disrupted the transport sector in
Europe's biggest economy.
(Reporting by Maria Martinez, Rachel More and Miranda Murray,
Editing by Friederike Heine and Hugh Lawson)
