Wednesday 21 March 2018

German business confidence hits 20-year high

Jeff Black and Christian Vits

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.

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 0.7pc in the third quarter from a record 2.3pc in the second, private consumption was one of the main growth contributors. German sports carmaker Porsche SE yesterday reported a seven-fold 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 $1.33.

Europe's largest economy will grow 3.7pc this year, 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 eurozone, the German economy seems to be an island of happiness."

Germany's benchmark DAX stock index has gained more than 12pc this year, compared with a decline of 7pc 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 neighbours.

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.

Euro-area governments' efforts to rein in ballooning budget deficits may still damp German growth. German factory orders unexpectedly dropped in September, led by a slump in euro-area demand for investment goods, and industrial production also fell.

Irish Independent

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