German business climate survey points to better growth

Chris Papadopoullos
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The strong survey suggested growth will begin to edge up (Source: Getty)

A widely followed German business confidence survey has suggested that the Eurozone’s biggest economy is set for stronger growth ahead after a disappointing growth figure was confirmed today.

The German-based Institute for Economic Research (IFO) said its business climate index, derived from a survey of around 7,000 firms in services, manufacturing and construction, edged up to a score of 108.3 for August, up from July’s 108.0.

The strong survey suggests growth in Germany is unlikely to disappoint for long. Its economy grew 0.4 per cent from April to June, according to government statistics body Destatis, in line with a previous flash estimate. Exports were 2.2 per cent higher than the previous three months, while imports climbed just 0.8 per cent. The resulting trade surplus added 0.7 percentage points to growth.

“On the face of it, the index looks consistent with a pick-up in German annual GDP growth from the second quarter’s 1.6 per cent to about two per cent,” said Jennifer McKeown from Capital Economics.

However, one piece of data that partially blighted the outlook was a fall in the expectations component of the survey, its fourth drop in five months.

While the IFO survey points to stronger growth from July to September, McKeown said the message from the survey was that the economy may start to slow before long.

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