European Union companies are confident that the region's economic recovery, led by Germany, will continue even amid signs of a slowdown in the US, the Eurochambres trade group said in a study.
While the European Central Bank's interest-rate increases over the past year, and the prospect of further rises in 2007, “may have had a dampening effect” on investment forecasts, the Eurochambres survey “indicates stronger business confidence” than the European Commission's latest economic-growth projections, the group said today in a statement. “The main reason behind the upswing in the European economy is Germany's recovery,” Eurochambres, which represents 2,000 chambers of commerce and industry in Europe, said in releasing the survey. The group polled 78,000 companies across Europe in September and October. “The economic upswing is going to continue, although there are risks of a slower pace,” Eurochambres said, citing a potential slowdown in Germany in early 2007 and a cooling in the world economy.
Business confidence in Germany, Europe's largest economy, unexpectedly rose in November, matching a 15-year high, as export and investment prospects improved. The ECB is poised to raise rates this week for the sixth time in a year, and ECB President Jean-Claude Trichet may prepare the ground for another increase in the first quarter as the euro region's fastest expansion in six years threatens to spur inflation. The Frankfurt-based ECB will lift its benchmark rate by a quarter-point to 3.5% on December 7, according to all of the 41 economists surveyed by Bloomberg News. If the slowdown in the US is sustained, it is “bound to impact negatively on European economies eventually,” Eurochambres said. The trade group urged countries to open up markets and make it easier for companies to hire workers' so as not to derail the recovery. (Bloomberg)