German businesses more confident than ever

FRANKFURT AM MAIN

A closely-watched monthly survey of German business leaders hit its highest-ever level in October, the Ifo economic institute said on Oct. 25, pointing to continued strong performance for Europe’s largest economy.

Ifo’s business climate index rebounded from a September slump to reach 116.7 points in October, beating analysts’ forecasts of a further fall.“Germany’s economy is powering ahead,” Ifo president Clemens Fuest said in a statement, adding that “companies are very optimistic about the months ahead.”    

Businesses’ judgements of both the present economic situation and their expectations for the coming months increased compared with the level in September. 

In different sectors, manufacturing firms, retailers and construction companies were all more optimistic, while wholesalers’ confidence fell slightly.Analysts surveyed by Factset had predicted a fall in the Ifo reading, after a complicated election outcome late last month left Chancellor Angela Merkel with the tricky task of building a four-party governing coalition in Berlin.

But other conditions remain favourable for business, with economic growth picking up for Germany’s neighbours and closest trading partners in the 19-nation eurozone and high levels of confidence among consumers at home.

Meanwhile, the European Central Bank is expected to slow but not shut off its flood of easy money supporting expansion in the single currency area at a meeting on Oct. 26.

“Today’s Ifo index has definitely washed away earlier tentative signs that the economy is levelling off,” economist Carsten Brzeski of ING Diba bank said.

“For the time being, the German growth party continues as if there was no tomorrow.”Ifo’s business confidence reading is based on a survey of around 7,000 firms across Germany.