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German Business Confidence Rises For First Time In 7 Months

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Germany's business confidence strengthened in March, after weakening in the previous six months, as businesses were more optimistic regarding the future and the economy's resilience, results of a key survey showed on Monday.

The ifo business confidence index rose to 99.6 from a revised 98.7 in February, data from the Munich-based Ifo Institute revealed.

Economists had expected the reading to remain unchanged at February's original score of 98.5.

The ifo index rose for the first time since August 2018.

"The companies are somewhat more satisfied with their current business situation, and they are decidedly more optimistic regarding business in the coming six months," the ifo Institute President Clemens Fuest said.

"The German economy is showing resilience."

The expectations measure of the survey climbed to 95.6 from 93.8 in February. Economists had forecast a score of 94.

The current assessment index edged up to 103.8 from 103.4 in February. Economists had expected the index to ease to 102.9.

Meanwhile, the survey showed that the German manufacturing was not yet out of the woods, suggesting that the activity in the automotive sector is yet to gain momentum.

The factory sector confidence weakened again and expectations were dull, falling to its weakest level since November 2012.

In contrast, the morale in the services sector improved markedly, thanks mainly to more optimistic expectations that were boosted by a more positive assessment of the already favorable business situation.

The assessment of the current situation was the strongest since May 2018 in the trade sector. Consequently, business expectations improved.

Confidence rebounded in the construction sector in March, due to a clearly improved current business situation, and the outlook was largely unchanged.

The upbeat Ifo survey results came after a run of weak data for the biggest euro area economy in the past few days.

The IHS Markit purchasing managers' survey results showed on Friday that the German private sector grew at its slowest pace in nearly six years, led by a sharp decline in manufacturing.

A slump in new export orders led the sharp contraction in manufacturing order books. Delayed decision-making among clients due to uncertainty, as well as weaker demand in the automotive sector contributed to the fall in demand.

Earlier in the month, a panel of economic advisers to the German government known as the "wise men" slashed the growth projection for this year to 0.8 percent from 1.5 percent predicted in November. However, a recession is unlikely, the panel said.

The Ifo Institute also trimmed its German growth projection for this year to 0.6 percent from 1.1 percent. The think tank cited the troubles in the industrial sector and the weakening demand for German exports as reasons for the downgrade.

However, the outlook for next year was raised to 1.8 percent from 1.6 percent as Ifo expects the production difficulties to be gradually overcome and private consumption to remain robust.

The Bundesbank said in its monthly report that the German economy is unlikely to rebound in the first quarter as the manufacturing slowdown continued.

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