Photographer: Krisztian Bocsi/Bloomberg

German Business Confidence Improves as Growth Strengthens

  • Ifo business climate index rises to 111 vs estimated 110.6
  • Gauges for current situation and expectations improve

German business sentiment rose to the highest level in almost three years in December, signaling growth in Europe’s largest economy picked up speed toward the end of the year.

The Munich-based Ifo institute’s business climate index climbed to 111 from 110.4 in November. That’s the strongest since February 2014 and compares with a median estimate in a Bloomberg survey of economists of 110.6.

The report is the latest indication that Germany’s economy may be back in the fast lane after a temporary slowdown in the summer months. IHS Markit’s Purchasing Managers’ Index showed last week that manufacturing was expanding at its strongest pace in almost three years in December, after unemployment held at a record low the previous month.

“It looks like the German economy is getting a good start next year,” Ifo President Clemens Fuest said in an interview on Bloomberg Television. “It’s looking quite good, it’s looking solid.”

The institute raised its growth projections for the next two years on Friday.

A measure of current economic conditions rose to 116.6 from 115.6, according to the report. Ifo’s gauge of expectations improved to 105.6 from 105.5.

“The good assessment of current conditions is due in particular to sustained solid domestic demand, which is complemented by expectations for improved export prospects in the coming year,” said Lucas Kramer, an economist at Deutsche Postbank AG in Bonn. “Sentiment signals that the German economy will start 2017 with momentum.”

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