German Business Confidence Rises to Highest Level Since 2014

  • Ifo survey signals companies overcoming concerns over slowdown
  • Recent weak economic data comes on back of worries over Brexit

German business sentiment surged to the highest level in more than two years in September in a sign that corporate concerns are easing over the economic outlook and the consequences of Britain’s decision to leave the European Union, a report from the Munich-based Ifo institute showed on Monday.

Key Points

  • Germany’s business climate index rose to 109.5 from a revised 106.3. That’s the highest since May 2014. Economists predicted a figure of 106.3.
  • Gauges for current conditions rose to 114.7, and expectations increased to 104.5

Big Picture

The figures come after the Bundesbank last week toned down its outlook for the German economy, saying it expected growth to slow in the third quarter. A composite Purchasing Managers Index published Friday dropped to a 16-month low, with the services sector almost stagnating. European Central Bank President Mario Draghi, who will visit the German parliament on Wednesday, has signaled that the country should use its “fiscal space” for stimulus.

Economist Takeaways

“German confidence indicators are currently sending mixed and sometimes even opposing signals,” Carsten Brzeski, chief economist at ING-DiBa in Frankfurt, wrote in a note to clients. “All in all, disappointing hard data in July and falling soft data since the Brexit vote had provided further evidence that the German economy was losing momentum. Today’s Ifo index suggests that at least the Brexit fears have disappeared as quickly as they had emerged.”

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