German firms gain confidence
FRANKFURT: A closely-watched index of German business confidence rose for the fifth month in a row in September, reflecting the improved prospects for Europe’s largest economy and the 17-country euro currency union.
The Ifo institute’s index, released yesterday, edged up to 107.7 points from 107.6 in August. Market analysts had expected it to rise slightly more, to 108.0
The index is based on a survey of 7,000 companies about how they think the situation is now, and how they see things going in the coming months. Economist Carsten Brzeski at ING said the results showed the economy was ‘‘stabilising at a high level.’’
Germany’s economy expanded 0.7% in the second quarter, helping the euro zone return to growth after six quarters of shrinking output. But recent figures for German industrial production and retail sales have been disappointing, raising concerns that the third quarter may not be as strong.
Brzeski said the Ifo figures should dispel those doubts.
‘‘Today’s Ifo provides further evidence that fears about a sharp slowdown of the German economy in the second half of the year were overdone,’’ he wrote in a note to investors.
Holger Schmieding at Berenberg Bank said that while it was ‘‘slightly disappointing’’ the index fell short of market expectations, it was reassuring that domestic retail demand, along with exports, was supporting growth.
He predicted the economy would expand 0.5% in both the third and fourth quarters.
The euro zone is still struggling with excessive levels of debt in several of its member countries, including Greece, Ireland, Portugal, Spain and Italy.
A promise by the European Central Bank to buy the bonds of indebted countries if they promise to fix their finances has calmed bond markets over the past year. Growth, however, remains weak after governments cut spending to reduce debt. The euro zone’s economy expanded 0.3% in the second quarter from the quarter before. Economists say stronger growth than that is needed to reduce unemployment, which is at a record of 12.1%.