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German Business Confidence Improves Unexpectedly

The slowdown in the Chinese economy is not now dampening the confidence of German exporters, Ifo economist Klaus Wohlrabe told Reuters on Thursday.

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The Ifo Business Climate Index, considered the most important barometer for the German economy, is based on about 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing.

However, they expressed greater optimism about future business developments. A measure for current conditions fell to 114 from 114.8.

Kiel Institute for the World Economy said on September 10. “The Ifo survey tends to lag a bit behind other surveys such as the ZEW and PMI, both of which softened in September”.

Still, German business sentiment could take a hit from an emission scandal that has embroiled auto manufacturer Volkswagen this week and is expected to undermine trust in the German manufacturing sector.

A survey among purchasing managers in German companies showed on Wednesday that the private sector remained on a growth path in September, suggesting that the economy as a whole grew by around 0.4 per cent in the third quarter.

He felt the Ifo index could therefore fall next month. “When looking at the latest events, headwinds should have been blowing strongly in the face of German companies”, said Andreas Rees of UniCredit Economics.

Germany’s benchmark DAX Index briefly rose after the report.

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And he added: “At this stage, it is way too early to derive any reliable estimate whether and to which extent the events at Volkswagen will have a dampening effect on the overall economy”.

German Business Confidence Rises in Sign of Strong Recovery