World Economy

German BCI Hits 26-Year High

Manufacturing continued its impressive performance  with output and new orders growing.Manufacturing continued its impressive performance  with output and new orders growing.

A survey shows that business confidence in Germany has risen to its highest level in 26 years. The strong showing was slightly above economists’ expectations.

The Ifo institute said Tuesday that its monthly confidence index, a closely watched indicator for Europe’s biggest the economy, rose to 114.6 points for May from 113 in April. Economists had forecast that it would increase to 114.1, AP reported.

Ifo said that that was the highest figure since 1991 and, along with other data, points to growth of 0.6% in the second quarter. That would match the quarter-on-quarter growth figure of 0.6% for the January-March period.

Ifo surveys some 7,000 companies for its index. In May, executives’ view of both their current situation and the outlook for the next six months brightened.

Meanwhile, IHS Markit’s composite indicator for Germany, the region’s largest economy, showed manufacturing growth surged to a 73-month high of 59.4, a reading that more than offset a 2-month low of 55.2 for the country’s services sector.

“Manufacturing continued its impressive performance with output, new orders and backlogs all growing at the sharpest rates in over six years, and export expansion hitting a seven-year record,” said senior economist Trevor Balchin. “Cost pressures at manufacturers also eased noticeably in May, but remained strong overall.”

  Spending Spree

The economy in Europe’s powerhouse has maintained its momentum, growing sharply again in the first three months of the year. Analysts said strong domestic consumption and investments were behind the expansion.

But the bulk of economists in the country were more optimistic. “Full order books everywhere have emboldened companies to invest a lot more as they expect the economic pick-up to continue in the months ahead,” VP Bank analyst Thomas Gitzel told Reuters.

The Q1 result was partly due to higher private household spending, but also a result of higher state spending, with more resources going into accommodating and integrating refugees and migrants.

Export-oriented firms continued to profit from a weaker euro, which fueled shipments abroad. In March 2017, Destatis recorded the highest ever export volume for the month.

The statistics agency pointed to companies’ increased willingness to invest more in machinery and equipment.

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