German businesses remain confident

GERMAN businesses have this month shrugged off weak markets and concerns about the health of the United States and are now as confident as they were in June 2007, according to the Ifo institute’s business climate index, which was published yesterday.

The headline index rose to 106.7 from 106.2 in July while firms’ assessment of the current situation continued to rise to 108.2, from 106.8.

Although the expectations index dipped slightly in August to 105.2 from 105.5, it remains far above its historical average, indicating that the manufacturing-led recovery in Europe’s largest economy is showing little sign of losing momentum.

Hans-Werner Sinn, president of the German economic thinktank, said: “Manufacturing firms have reported a better business situation than in July. With regard to the six-month business outlook they are still very confident.”

Societe Generale’s Klaus Baader said: “There is no sign whatsoever of a cyclical downturn in this survey which has historically provided a very reliable guide to growth.”

Carsten Brzeski, economist at ING agreed:

“The Ifo index reflects untarnished confidence and bodes very well for near-term growth prospects. Second quarter growth will remain exceptional. However, even with an inevitable shift into a lower gear in the second half of the year, the Eurozone’s growth engine will continue to run smoothly.”