German confidence up but low coming: analysts
GERMAN business confidence has hit a two-year high, the Ifo economic institute said, suggesting the country had shaken off post-Brexit blues, but analysts warned of a possible slowdown ahead.
The Munich institute’s headline business confidence index hit 110.5 points in October, up one point from September’s 109.5, and the highest level since April 2014.
A plunge in the index over July and August was blamed on Britain’s June 23 vote to quit the EU, but a spring had returned to German businesses’ step by September.
“The upturn in the German economy is gathering impetus,” Ifo president Clemens Fuest said.
September’s surprise confidence rebound had prompted Mr Fuest to predict a “golden autumn” for Europe’s largest economy.
In the event, business people’s mood in October beat the forecasts of analysts surveyed by Factset, who had predicted the indicator would remain flat.
Sub-indexes measuring businesses’ opinion of the current economic situation and the outlook for the coming six months both rose.
Expectations saw an especially strong surge, reaching 106.1 points – an increase of 1.6 points on September’s figure.
Both the manufacturing and construction sectors were confident about the future, with building firms’ expectations hitting a new record high.
Retailers’ mood was largely unchanged from September, while wholesalers’ view of both the current climate and the coming months darkened slightly.
The data comes on top of strong readings in the purchasing managers’ index (PMI) – a survey of activity in private companies – in Germany and the whole eurozone.
October’s PMI and comforting industrial production data for August “suggest that the German economy continued to perform well in the second half of 2016,” Jennifer McKeown of Capital Economics said.
But she pointed to a likely slight slowing of growth in Europe’s economic powerhouse in 2017, as inflation begins to weigh on consumer spending. –