Business Sentiment in Germany Soars

The sick man of Europe is feeling much better, with investor and business sentiment in Germany's economy soaring for the fifth month in a row, according to a survey released Tuesday.

The index of German sentiment, conducted by the ZEW, or Center for European Economic Research, rose to 16.5 points in April, from 5.8 points in March and 2.9 points in February. That was better than the 10.9 points analysts polled by Dow Jones Newswires had predicted.

The rise augurs more growth in Germany in the next six months because of an improving labor market and lower unemployment that is helping bolster consumer demand for everything from washing machines to clothing to new cars.

The Mannheim-based institute also said that domestic demand is outweighing concerns that global economic growth is on the downshift.

"Even though the world economy is supposed to grow more moderately owing to the expected economic downturn in the U.S., economic growth remains robust," it said in a statement.

ZEW President Wolfgang Franz said that Germany's economic growth is bearing fruit among its more than 82 million residents, but warned unemployment was still high.

The Labor Market

In March, the unadjusted jobless rate was 9.8%, with 4.1 million Germans out of work.

"The economic upswing is now being felt on the labor market; it is particularly pleasing that the number of employees paying social insurance contributions is increasing," he said. "Yet, this should not obscure the fact that so far the recovery has not helped the problem groups on the labor market -- low-qualified persons and the long-term unemployed."

The figures come as Germany's IG Metall union, which has some 3.4 million members, has called for a 6.5% increase in wages this year and has threatened walkouts and strikes if employers like DaimlerChrysler, Siemens and others do not meet their demands.

The center's assessment of the current business situation was also up, shaking off a decline from last month, rising to 76.9 points from 69.2 points a month earlier.

Economic expectations for the 13-nation euro zone were up, too, rising by 5.6 points to 10.7 points.

The Center polled 320 analysts and institutional investors for the index.