German business confidence reaches new record high

Ivan Schwartz
June 26, 2017

The optimism was shared by manufacturers - who planned to ramp up production - wholesalers and retailers, Ifo said, pointing to a lower index only in construction where the assessments of current and future business nevertheless remained at a high level. With domestic demand supported by a buoyant labor market, risks to growth stem nearly exclusively from global forces.

Capital Economics said: "June's German Ifo survey suggests that the pace of economic growth will accelerate sharply in the months ahead". It sees 1.8% growth this year, compared with 1.5% predicted before, and expects 2.0% growth for 2018. However, the market has largely shrugged off the benchmark Germany's stronger Ifo business climate index, released today.

"Private consumption is and remains one of the most important pillars of the German economy", he said, adding the industrial sector was also robust. "As the domestic economy is gaining even more momentum, the biggest risks for the German economy still come from overseas". Hopes for a "soft" Brexit were so far having no impact on sentiment.

The Institute for Economic research (Ifo) in Munich said that its monthly confidence index was up from a record 114.6 points in May to 115.1 points in June. The reading compared with a Reuters consensus forecast for a value of 114.4. A measure of current economic conditions improved to 124.1 from a revised 123.3, and a gauge of expectations rose to 106.8 from 106.5.

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Meanwhile, the expectations index advanced to 106.8 in June from 106.5 the month before, surpassing a forecast of 106.4.

"The inexplicable euphoria seems to be continuing", said Andreas Scheuerle, an economist at Dekabank in Frankfurt.

Second-quarter gross domestic product data will be published on August 15.

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