World Economy

German BCI Soars High

German BCI Soars HighGerman BCI Soars High

German business confidence soared to a "jubilant" new high in June, having already reached a quarter-century peak the previous month, a survey said Monday.

The closely-watched Ifo business confidence index set a new record of 115.1 points, defying expectations of analysts of a slight decline after it reached 114.6 in May, the highest since 1991, AFP reported.

The Munich-based Ifo Institute for Economic Research calculates the score from a survey of 7,000 companies, who are asked to give their assessments of the current business situation and their expectations for the next six months. Analysts surveyed by financial services provider Factset had expected 114.4 points in June.

The strong optimism comes despite challenges for Europe's top exporters, from US President Donald Trump's "America First" stance on trade to Britain's looming exit from the European Union.

"Sentiment among German businesses is jubilant," said Ifo president Clemens Fuest in a statement. "Companies were significantly more satisfied with their current business situation this month. They also expect business to improve."

The German economy expanded by 0.6% in the first quarter, and the government expects growth to hit 1.5% for the full year, while several economists have predicted it would reach or top last year's level of 1.8%.

Fuest said "Germany's economy is performing very strongly. In manufacturing, the index rose slightly. Assessments of the current business situation remained unchanged at a very high level."

The optimism was shared by manufacturers, wholesalers and retailers, Ifo said, pointing to a lower index only in construction where the assessments of current and future business nevertheless remained at a high level.

The Ifo survey "suggests that GDP growth will accelerate sharply in the months ahead," said Capital Economics' Jennifer McKeown, chief European economist. "While growth is unlikely to match the pace implied by this survey, we see the German economy outperforming consensus expectations this year."

McKeown cautioned there were some reasons "not to take this survey at face value" because "it has been too optimistic for several months now".

"Nonetheless, the health of global demand and the very strong state of the German labor market both suggest that growth should gain pace in the months ahead," she said.

Thomas Strobel of UniCredit Research said that the fifth consecutive monthly rise of the index supported the view that German economic activity would remain robust throughout this year. "Private consumer spending is being fuelled by a booming labor market and record-low unemployment," he wrote in a note.

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