Ger­man out­look clouded by Trump, Greece, Brexit

Up­beat busi­ness morale sig­nals Q4 re­bound

Kuwait Times - - BUSINESS -

BER­LIN: Ger­man busi­ness morale rose in De­cem­ber, hit­ting its high­est level since Fe­bru­ary 2014 and sup­port­ing ex­pec­ta­tions that Europe’s largest econ­omy will re­bound in the fourth quar­ter.

The up­beat read­ing was wel­comed by economists as a sign of eco­nomic re­silience in the face of un­cer­tain­ties that are cloud­ing the out­look for Ger­many, in­clud­ing Bri­tain’s de­ci­sion to leave the Euro­pean Union, un­pre­dictable US pol­icy un­der pres­i­dent-elect Don­ald Trump, and fi­nan­cial con­cerns over Greece and Italy. The Mu­nich-based Ifo eco­nomic in­sti­tute said on Mon­day its busi­ness cli­mate in­dex, based on a monthly sur­vey of some 7,000 firms, rose to 111.0 af­ter from 110.4 in Novem­ber.

The De­cem­ber read­ing com­pared with a Reuters con­sen­sus fore­cast for a value of 110.7. “The Ger­man econ­omy is mak­ing a strong fin­ish to the year,” Ifo chief Cle­mens Fuest said in a state­ment. He added that both the man­u­fac­tur­ing and whole­sal­ing in­dices rose and man­u­fac­tur­ers were plan­ning to ramp up pro­duc­tion in the months ahead.

The up­beat read­ing came af­ter Ifo said on Fri­day the Ger­man econ­omy will re­bound more strongly than pre­vi­ously ex­pected in the fourth quar­ter and this growth mo­men­tum will carry through into 2017. ING econ­o­mist Carsten Brzeski said growth next year will be weaker than in 2016, as the three main eco­nomic driv­ers - con­struc­tion, con­sump­tion and gov­ern­ment spend­ing - will lose mo­men­tum be­cause in­ter­est rates are un­likely to drop fur­ther, in­fla­tion will edge up and the un­em­ploy­ment rate stag­nate.

“Un­for­tu­nately, as with so many good things, the cur­rent pos­i­tive growth cy­cle is also com­ing to an end. Grad­u­ally, not abruptly,” he wrote in a note to clients. He added: “Real risks to the Ger­man out­look mainly seem to stem from the out­side. The still un­known im­pact from Pres­i­dent-elect Trump on trade and eco­nomic poli­cies, the on­go­ing Brexit un­cer­tainty and re­newed po­lit­i­cal ten­sions in Europe due to sev­eral elec­tions or a new flar­ing up of the Greek cri­sis are in our view the big­gest risks for 2017.”

The econ­omy has been send­ing mixed sig­nals. A jump in in­dus­trial or­ders and up­beat sen­ti­ment sur­veys have in­di­cated a re­bound in the last three months of the year. Ifo’s cur­rent busi­ness sit­u­a­tion in­dex reached its high­est level since Fe­bru­ary 2012.

But ex­ports and in­dus­trial out­put rose less than ex­pected in Oc­to­ber, ta­per­ing ex­pec­ta­tions for a strong re­bound in the fourth quar­ter af­ter the growth pace halved to 0.2 per­cent over the sum­mer months. Ifo’s busi­ness cli­mate in­dex for whole­sal­ing rose to its high­est level in al­most three years, re­flect­ing the econ­omy’s shift to con­sump­tion for growth. —Reuters


BER­LIN: This file photo taken on June 6, 2016 shows a worker walk­ing up a scaf­fold­ing at a con­struc­tion site in Ber­lin. Ger­man busi­nesses rounded off 2016 with a stronger-than-fore­cast in­crease in con­fi­dence, a closely-fol­lowed sur­vey showed yes­ter­day.

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