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German Business Confidence Slides In February

Ifo institute's monthly index declined to 82.6 points in February from 83 last month, even as a government stimulus plan helped pep up firms' outlook for the future.

BERLIN (AP) -- German business confidence slipped in February, with a grim economic situation weighing on sentiment even as a government stimulus plan helped pep up firms' outlook for the future, a closely watched survey showed Tuesday.

The Ifo institute's monthly index declined to 82.6 points in February from 83 last month.

That wiped out a slight gain in January, which followed seven consecutive months of declines, and defied economists' predictions that the index would remain static or rise slightly.

Germany's economy, Europe's biggest, went into recession last fall as the global economic crisis sapped demand for its exports. The recession deepened in the fourth quarter, when the economy shrank by 2.1 percent.

Ifo said companies' view of their current situation darkened for the fourth straight month. A subindex measuring that view slipped to 84.3 points from 86.8.

However, expectations for the next six months showed their second consecutive improvement, climbing to 80.9 points from 79.5.

"The expectations of the firms remain basically skeptical, nevertheless," Ifo president Hans-Werner Sinn said in a statement. "On the whole the survey results do not signal a cyclical turning point."

Ifo said the mood improved among construction firms and among car retailers. The German parliament this month approved a euro50 billion ($64 billion) stimulus package that includes investment in infrastructure and a popular euro2,500 bonus for people who scrap old cars to buy new vehicles.

"This at least suggests that a bottoming is now under way that could potentially lead to a return to positive quarterly GDP growth in the latter months of 2009," when the stimulus measures should begin to make their full impact felt, said Timo Klein, an economist at IHS Global Insight in Frankfurt.

Klein cautioned that "it will require at least one more month of a solidly improving Ifo expectations index to be reasonably confident of a recovery of some form."

UniCredit economist Andreas Rees noted that Ifo's index was now at its lowest since December 1982.

He pointed to hopeful signs that parts of the government stimulus package are already having an effect. However, he warned that first-quarter economic data will likely be "very ugly" and said risks remain that the economy may stabilize only in this year's fourth quarter or even later.

Ifo's survey was based on some 7,000 responses from companies in various sectors.

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