Business Confidence in Germany Unexpectedly Surges to Record in November
German Business Confidence Unexpectedly Surges
Guenter Schiffmann/Bloomberg
Household spending is putting Germany’s economy on a firmer footing even as global and euro-area demand for its exports starts to slacken.
Household spending is putting Germany’s economy on a firmer footing even as global and euro-area demand for its exports starts to slacken. Photographer: Guenter Schiffmann/Bloomberg
German business confidence unexpectedly surged to a record high in November as domestic spending increased, bolstering the economic outlook.
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, rose to 109.3 from 107.7 in October. That’s the highest since records for a reunified Germany began in 1991. Economists predicted a decline to 107.5, according to the median of 42 forecasts in Bloomberg News survey.
Household spending is putting Germany’s economy on a firmer footing even as global and euro-area demand for its exports starts to slacken. While the pace of economic expansion slowed to 0.7 percent in the third quarter from a record 2.3 percent in the second, private consumption was one of the main growth contributors, the Federal Statistics Office said yesterday. German sports carmaker Porsche SE today reported a sevenfold increase in operating profit.
“This is a boom level,” Holger Schmieding, chief economist at Joh Berenberg Gossler & Co. in London, said of today’s Ifo reading. “Domestic demand is really gathering steam.”
Ifo’s gauge of executives’ expectations rose to 106.3, also a record high, from 105.2, and a measure of the current situation jumped to 112.3 from 110.2.
The euro initially rose on the report before resuming its decline to trade at $1.3312 at 10:48 a.m. in Frankfurt.
Outpacing Europe
Europe’s largest economy will grow 3.7 percent this year, according to the government’s council of economic advisors, even as the region’s sovereign debt crisis curbs growth in debt- strapped nations such as Greece, Ireland and Portugal.
Germany will remain the “economic powerhouse” of the 16- nation euro area, said Carsten Brzeski, an economist at ING Group in Brussels. “Amidst new financial market turmoil and sovereign debt woes in the euro zone, the German economy seems to be an island of happiness.”
Germany’s benchmark DAX stock index has gained more than 12 percent this year, compared with a decline of 7 percent in the Euro Stoxx 50 gauge of euro-area equities. German investor confidence rose for the first time in seven months in November as the economy powered ahead of its euro-area neighbors.
Unemployment fell below the three-million mark in October to the lowest in 18 years as companies stepped up hiring to meet foreign demand for goods including cars and machinery, supporting private consumption.
Shorter Christmas
Porsche, the maker of the 911 sports car, today said operating profit jumped to 395 million euros ($526 million) in the three months through October as sales climbed 80 percent.
Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz, the world’s two largest makers of luxury autos, will shorten Christmas breaks at their factories because of stronger demand for new models. “Production capacity is the limiting factor at the moment,” Michael Rebstock, a spokesman for BMW, said in a phone interview this week.
Euro-area governments’ efforts to rein in ballooning budget deficits may still damp German growth. Ireland this week became the second euro nation after Greece to seek a bailout from the European Union and International Monetary Fund, and investors are speculating Portugal could be next.
German factory orders unexpectedly dropped in September, led by a slump in euro-area demand for investment goods, and industrial production also fell.
“The recovery has more legs than just exports,” said Jens Sondergaard, an economist at Nomura International Plc in London. “Consumption was pretty strong in Germany in the third quarter, and so was investment. All lights are flashing green.”
To contact the reporters on this story: Christian Vits in Frankfurt at cvits@bloomberg.net; Jeffrey Black in Frankfurt at jblack25@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
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