BEIJING, Jan. 12 -- Investor confidence in Germany, Europe's largest economy, increased for a second month in January after the cost of oil declined and the dollar's recovery against the euro reduced concern about slowing export growth.

    The ZEW Centre for European Economic Research's index of institutional and analyst sentiment rose to 26.9 from 14.4 in December, the Mannheim-based institute said on its website. Economists expected a reading of 18, according to the median of 37 forecasts in a Bloomberg survey.

    The price of Brent crude oil futures have fallen 17 per cent since reaching a record US$51.95 a barrel on October 27, cutting fuel expenses for companies such as Deutsche Post AG, Europe's largest postal company. The euro has declined more than 3 per cent against the dollar this year, easing concern that a stronger currency would smother Germany's export-led recovery.

    "Oil prices shouldn't be a stumbling block anymore," said Carsten Klude, head of strategy at M.M. Warburg in Hamburg. "With the euro dropping, exporters will continue to benefit from the stronger global economy. Growth won't weaken as much as feared."

    The euro extended gains against the dollar after the ZEW report, rising 0.7 per cent to US$1.3160 at 11:03 am yesterday in Frankfurt. Stocks held losses, with the German benchmark DAX 30 index declining 0.9 per cent to 4270.21 points.

    ZEW's index fell the most in two years in November as higher oil costs and the euro's 8 per cent appreciation against the dollar in 2004 threatened growth. Germany's six leading economic institutes last month cut their 2005 growth forecasts to between 0.8 per cent and 1.8 per cent on expectations domestic demand will not recover enough to offset a slowdown in sales abroad.

    European Central Bank President Jean-Claude Trichet said on Monday he is "confident" about global economic expansion and that the effect of more expensive oil had already "been absorbed." Trichet, speaking after a meeting of central bank governors from the Group of 10 nations, did not repeat a statement that exchange-rate fluctuations were "unwelcome."

    BMW AG Chief Executive Officer Helmut Panke said in Detroit on Monday that the world's second-largest maker of luxury cars will report record sales this year. Profit may be hurt by the decline in the dollar and rising commodity prices, Panke said.

    The fastest global expansion in nearly three decades powered Germany's recovery last year. The International Monetary Fund expects growth of about 4 per cent this year after 5 per cent in 2004, IMF Managing Director Rodrigo de Rato said in November.

    Reduced demand for German products abroad may have led industrial production to decline 0.1 per cent in November, according to the median of 38 forecasts in a Bloomberg survey. The Economics and Labour Ministry said this week that factory orders fell 2.3 per cent in the month. The government releases the industrial production report today in Berlin.

    European countries "will not benefit as much from rising exports this year as a consequence of the euro's appreciation and a calmer world economy" said Edgar Ernst, chief financial officer of Deutsche Post AG. He said Bonn-based mail carrier, Europe's largest, had "for the most part" protected itself against currency swings.

    (Source: China Daily/ by Brian Swint)