* Ifo rises to five-month high, boosting European shares
* Firms more confident about future, still glum on current
conditions
* Data points to early-2013 bounceback after weak end to
2012
* Ifo says euro crisis has eased, export expectations
improve
BERLIN, Dec 19 (Reuters) - Morale at German businesses
climbed in December as their confidence in the outlook rose at
its fastest rate in 2-1/2 years, boosting hopes Europe's largest
economy will bounce back quickly after a weak end to 2012.
The Munich-based Ifo think tank said on Wednesday its
business climate index, based on a monthly survey of some 7,000
firms, rose to 102.4 in December.
That was up from 101.4 in November and the highest level in
five months, though the sub-reading for current business
conditions fell.
"With a worsening current assessment but improving
expectations, today's Ifo sends a clear message: things will go
worse before they get better. It looks as if any contraction of
the economy should be short-lived," said Carsten Brzeski of ING.
Germany has been an engine of growth throughout much of the
three-year debt crisis in the euro zone, but persistent weakness
in other countries in the region has recently threatened to drag
its economy down.
German GDP could well contract in the fourth quarter, many
economists believe - a view supported by October's slump in
industrial output and narrowing of the trade surplus to its
lowest level in over half a year.
For 2013, the Ifo and the country's central bank this month
cut their growth forecasts for 2013 and the government may do
likewise.
But Wednesday's Ifo reading, which followed a December
Purchasing Managers' survey that showed the private sector
expand for the first time since April, beat the median forecast
in a Reuters poll of 40 economists for a rise to 102.0.
The data boosted European stocks to their highest levels of
the year. The euro also climbed against the dollar.
"The result ... supports our expectations that the German
economic climate should take a turn for the better by spring
2013 at the latest ... The economy should avoid a recession by a
whisker," said Heinrich Bayer of Postbank Research.
PROSPECTS MORE UPBEAT
Markets have also been encouraged by a European Central Bank
promise to buy the bonds of stricken euro states, an agreement
last week to release new aid to Greece and an upgrade of the
country's sovereign debt rating.
"There is a certain calming down at the end of the year.
Export expectations have risen. Companies are growing confident
again," Ifo economist Klaus Wohlrabe told Reuters.
The firms polled by Ifo were more pessimistic about their
current business conditions, with that index falling to 107.1
from 108.1 in November, the lowest level in 2-1/2 years.
But the sub-reading on expectations increased to 97.9 from
95.2, the biggest month-on-month rise since June 2010.
Wohlrabe said growth impulses would come from Asia and the
United States, making up for a lack demand from recession-hit
peers in the rest of the European Union, where Germany sells
roughly 60 percent of its exports and governments are slashing
costs to rein in public deficits.
German luxury carmaker Daimler is revamping its
China operations, trying to catch up with rivals in a market
that has helped premium German manufacturers offset weakening
business in core European markets.
Last week, Ifo nearly halved its forecast for 2013 German
growth to 0.7 percent but said domestic demand would help it
pick up next year after a brief contraction this quarter.
Ifo said the euro zone's debt crisis had hit the German
economy later than expected, delaying the recovery.
Wohlrabe said he expected a 0.3 percent contraction this
quarter and "slightly positive" growth in the first three months
of 2013.
In line with that, a German trade group forecast on Tuesday
that steel production would return to modest growth next year,
with companies rebuilding stocks as demand from the automotive
and engineering sectors picks up.