FRANKFURT AM MAIN: German business confidence rose to its highest level in more than five and a half years in March, a regular survey showed Monday, beating analysts’ forecasts for a slight decline.
The Ifo institute’s closely-watched business climate index improved in March, adding 1.2 points to reach 112.3 points, the highest level since July 2011.
“The upswing in the German economy is gaining impetus,” commented Ifo president Clemens Fuest.
The March increase in confidence surprised observers of the German economy, as analysts surveyed by Factset had forecast a slight slip in the survey result.
Ifo’s headline figure is based on a survey of some 7,000 businesses which are asked about the current climate
and their expectations for the next six months.
The sub-indices covering the present economic situation and expectations both rose, as businesses shook off gloom about rising inflation and political uncertainty that had clouded readings earlier in the year.
Looking to individual sectors, manufacturers, retailers and construction firms all reported an increase in confidence, with wholesalers the only group to be more pessimistic about both the present situation and the months ahead.
“No-one was expecting such a sharp rise” in business confidence, analyst Uwe Burkert at LBBW bank commented.
“Anxieties about Brexit, Trump and the upcoming elections in France appear to have been dispelled.”
However, “this lack of concern seems to me somewhat overblown,” he cautioned.
Unlike businesses, surveys of investors and consumers this month showed that neither group has completely shaken off fears of inflation and political upset.
With consumer spending increasingly important to the German economy, retailers’ confidence about the coming months fell in the March survey.
While confidence indicators have pointed to faster growth since the start of 2017, “hard data have up to now been rather mixed,” noted analyst Carsten Brzeski of ING Diba bank, pointing to falls in recent industrial orders and retail sales figures.
“The big question is whether hard data can make the soft data’s promises come true, or whether confidence indicators simply jumped the gun and start to adjust to a less buoyant reality,” he added.