The French and German governments raised their growth forecasts for 2010 in a further sign that the eurozone’s two largest economies are set for a steady if unspectacular recovery.

The German finance ministry upgraded its growth projection from 1.2 to 1.5 per cent.

The improved forecasts reflect growing confidence among policymakers that the French and German economies will not suffer a relapse this year despite a deceleration in industrial output growth in the final quarter of 2009 after a particularly buoyant summer.

The Ifo Business Climate for industry and trade in Germany brightened once again in January. The current business situation of the firms has further improved. With regard to the business outlook for the coming half year the surveyed firms are more confident than before. The economic recovery continues at the beginning of the New Year.

In manufacturing the business climate index has risen noticeably. For the eighth time in succession, the firms have assessed their business situation as less unfavourable. Their business expectations have also brightened. For their export business they anticipate a clear revival. Although the utilisation of machinery and equipment is still below average, the rate is higher than three months ago. The personnel plans of the manufacturing firms are still geared to some staff reductions.

In construction the business climate index has risen strongly. Although the surveyed contractors have given slightly more unfavourable assessments of their current business situation than in December, they are clearly less sceptical regarding business in the near future. Currently, however, many firms are complaining about the weather-related constraints on construction activity.