German Recovers from Euro Zone Debt Smoothly

EuroAs the Euro Zone debt disaster darkened the outlook for Europe's largest economy, German business emotion dipped in May and private sector growth slowed. There is a fear in the market that the Euro Zone might crumple or the Zone might even disintegrate, this has brought a huge dose of ambiguity into the prospects of business.

“On the one hand you have a weaker euro and strong growth in Asia, which is positive. On the other hand, companies are facing a huge amount of uncertainty due to the debt crisis." said UniCredit economist Andreas Rees. A purchasing managers' index (PMI) heightened the anxiety by showing Germany's private sector development slowed in May as the crisis and a peak in inventory rebuilding put a footbrake on output and order book growth.

An Ifo index on current German business conditions edged up to 99.4 from 99.3 in April, but an expectations index fell to 103.7 from 104.0 last month. Germany exit its deepest post-war recession in the second quarter of last year but the revival slowed in the winter when harsh weather conditions dislocated business activity.

The Federal Statistics Office confirmed on Friday that Gross domestic product (GDP) grew 0.2 % in the first quarter of this year, expanding for the fourth consecutive quarter. The economy was put aside from a fall back into contraction in the January-March period by inventory building, which assisted outweigh shrinking private consumption and construction.