Finance & Business World

German business confidence probably increased to a 14-month high in November, suggesting the economic recovery may gather pace next year.

The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, increased to 92.5 from 91.9 in October, according to the median of 37 forecasts in a Bloomberg News survey of economists. That would be the highest reading since September last year. The index reached a 26-year low of 82.2 in March. Ifo releases the report at 10 a.m. today.

Economic growth accelerated in the third quarter as export orders rose and companies increased production and investment. The manufacturing industry expanded for a second month in November and the country’s benchmark DAX share index has advanced 19 percent this year. Unemployment, the euro’s strength and the expiry of government stimulus measures may still damp growth in 2010.

“New orders are strong, the inventory cycle is turning around and the manufacturing sector has just left recession, which means there’s a lot of room for improvement in the economy,” said Carsten Brzeski, senior economist at ING Group in Brussels. “Germany should continue leading the euro-zone economies for quite some time.”

The government last month raised its economic outlook, forecasting growth of about 1.2 percent in 2010 after a 5 percent contraction this year.

GDP Breakdown

Gross domestic product rose 0.7 percent in the third quarter from the second quarter, preliminary figures showed on Nov. 13. The Federal Statistics Office in Wiesbaden will release a detailed breakdown at 8 a.m. today.

Germany’s Beiersdorf AG, the maker of Nivea products, on Nov. 3 raised margin forecasts after reporting third-quarter profit that beat analysts’ estimates, saying its tape-making Tesa unit is seeing a “trend reversal in its industrial business.”

Ifo’s gauge of the current situation will increase to 88 from 87.3 while an index of executives’ expectations will advance to 97.3 from 96.8, according to the survey of economists.

Chancellor Angela Merkel’s government is spending about 85 billion euros ($127 billion) on measures to stimulate growth, including infrastructure projects and a 2,500-euro payment for people who junk an old car and buy a new one. The so-called cash-for-clunkers fund ran dry in September.

‘Propped Up’

“Growth so far has been propped up by stimulus,” said Costa Brunner, an economist at Natixis in Frankfurt. “There’s not a self-supporting recovery and the stimulus will run out. We see a W-shaped recovery, and a recession in the second half of 2010 isn’t out of the question.”

German investor confidence declined more than economists forecast in November on concern that the economic upswing isn’t sustainable.

Exports, the motor of German economic expansion this decade, have so far weathered the euro’s 20 percent appreciation against the dollar since mid-February.

“Exports will continue to steam ahead on the recovery in world trade and the pick-up in the global economy,” said Aline Schuiling, an economist at Fortis Bank Nederland in Amsterdam. “Ifo will continue, slowly, to move ahead.”

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