April 24, 2014 7:21 a.m. ET
German business sentiment improved at the start of the second quarter, a key sentiment indicator showed, suggesting that Europe's largest economy is on track for robust growth even in the face of a mounting geopolitical crisis involving one of Germany's major trading partners, Russia.
The upbeat report comes on the heels of business and consumer confidence surveys suggesting that the euro-zone economy, on the whole, is gradually gaining steam after a tepid recovery last year. Spain's growth rate likely accelerated last quarter, its central bank said Thursday. In contrast France, the euro bloc's second-largest economy, continued to signal sluggish growth.
Germany's Ifo business climate indicator was 111.2 in April, above a forecast of 110.5 in a Wall Street Journal survey of analysts ahead of the release. The indicator was 110.7 in March.
"Despite the crisis in Ukraine, the positive mood in the German economy prevails," said Ifo President Hans-Werner Sinn in an accompanying press release.
Experts say that Germany is building on growth closer to home, both in its own domestic economy and among its euro-zone peers. "Tailwinds come from the robust domestic demand and the ongoing recovery elsewhere in the eurozone," wrote BNP Paribas BNP.FR -0.63% BNP Paribas S.A. France: Paris €55.43 -0.35 -0.63% April 25, 2014 1:50 pm Volume : 1.26M P/E Ratio 14.25 Market Cap €68.43 Billion Dividend Yield 2.71% Rev. per Employee €502,858 04/25/14 Russian Rate Increase Follows ... 04/25/14 WPP Boosted by U.S., U.K. 04/24/14 Euro-Zone Data Point to Recove... More quote details and news » economist Evelyn Herrmann in a research note.
Data from most other euro-zone countries are also encouraging. For example, the Spanish economy seems to be firmly emerging after an epic recession. The country's central bank said in its April economic bulletin that the economy grew at a quarterly rate of 0.4% in the first three months of the year, compared with 0.2% growth in the fourth quarter. Rising consumer spending and corporate investment were the main growth drivers, the bank said.
Though the country still has one of the highest unemployment rates in the euro zone, hovering around 25%, the data are nevertheless encouraging.
The Spanish growth estimate is one of many indicators that struggling euro-zone states, such as Ireland, Portugal and Greece are starting to turn around.
France, however, remains a laggard in the euro-zone success story. Though not a crisis country, France "is lagging behind," said Berenberg economist Christian Schulz, adding that the country's failure to deliver significant economic reforms is weighing on growth.
"France continues to drift further away from Germany in terms of economic performance and competitiveness. It's the worst of both worlds in France: a woeful lack of growth and, unlike Spain and Portugal, a failure to undertake the necessary structural reforms to boost competitiveness," said Nicholas Spiro of Spiro Sovereign Strategy.
Business surveys show that the country isn't keeping up with the euro zone's growth pace. Data firm Markit's survey of 5,000 manufacturing and services businesses found that activity in the euro zone was on track to expand in April, at the fastest pace since May 2011. The composite Purchasing Managers Index rose to 54.0 from 53.1 in March. A reading above 50 indicates month-to-month expansion in activity.
But this masked differences between two of the euro zone's major economies. While the German PMI rose two points in April to 56.3, France's comparable indicator fell to 50.5 in April from 51.8 in March. Also, an indicator of business sentiment from statistics agency INSEE declined in April to 100 from 101 in March.
French firms may be upset about the slow pace of change in the country, this despite a recent reshuffle in President François Hollande's government and announcements of spending cuts from new Prime Minister Manuel Valls.
"Businesses seem to be using these surveys as a means to channel their vote of no confidence in this government," said Mr. Schulz.
France has struggled in recent years to bring its deficit in line with European rules. In response the country's new finance ministry Michel Sapin announced an additional €4 billion ($5.53 billion) in cuts Wednesday.
—Stacy Meichtry in Paris, Christopher Bjork in Madrid, and Paul Hannon in London contributed to this article.
Write to Todd Buell at todd.buell@wsj.com
Corrections & Amplifications
Nicholas Spiro of Spiro Sovereign Strategy contrasted France's failure to undertake structural reforms with Spain and Portugal's efforts in this area. In an earlier version of this article, Mr. Spiro mistakenly referred to Spain and Italy.
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