Monday 27 July 2020 10:56 am

German business morale picks up as recovery continues

German companies became more optimistic in July after morale rose at a record rate in June as the economy continued to recover from coronavirus and as spirits were lifted by the EU’s €750bn (£680bn) recovery fund.

The business climate index from respected think tank Ifo rose to 90.5 this month from 86.3 in June. It was the third rise in a row.

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“Companies were notably more satisfied with their current business situation,” said Ifo president Clemens Fuest. “They are also carefully optimistic about the coming months.”

“The German economy is recovering step by step,” he added.

Investors in Europe have been optimistic in recent days after the EU agreed an enormous €750bn bailout fund. It marks the first time EU countries have agreed to borrow jointly – issuing debt through the European Commission – on this scale.

The euro is currently trading at its highest level since the autumn of 2018. It was up 0.4 per cent this morning to $1.17.

In Germany, Europe’s biggest economy, business morale in the crucial manufacturing sector rose strongly in July. 

“Industrial companies’ assessment of their current situation is no longer quite as poor as in previous months,” said Fuest.

“Companies also expect business to grow again in the coming months.”

German services and exports boosted

In Germany’s services sector the business climate index rose strongly to enter positive territory.

Service providers said they were distinctly more satisfied with their current economic situation than in June.

Encouragingly for export-focused Germany, the upswing also continued in trade. 

Fuest said: “Companies adjusted their assessments of the current situation and their expectations for the coming months markedly upward. Business improved especially in retail.”

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However, rising coronavirus cases in Europe and around the world threaten to derail the global economy recovery. They could also hit demand for Germany’s products.

The UK at the weekend said it would quarantine travellers coming back from Spain, which has seen a surge in cases.