German Business Morale Hits 28-Month Peak As Brexit Concerns Slide
Business morale in Germany saw an unexpected spike in September, reaching a two year high according to a survey on Monday. The survey signlaed that business leaders had shrugged off worries over Brexit which had pressured their outlook during the previous month.
According to the Ifo economic institute based in Munich, the business climate increased to 109.5 based on a survey of 7,000 businesses from a previous 106.3, the largest increase over a months period since July 2010.
Clemens Fuest, the Ifo head said in a statement “Companies are clearly more optimistic about the months ahead. They are also more satisfied with their current business situation. The German economy is expecting a golden autumn”.
Another index which monitors corporate expectations across Germany also saw the six-month outlook improve to 104.5, topping numbers since November 2015 identifying many businesses expecting an upturn in economic conditions.
Ifo economist Klaus Wohlrabe said that people have steadied from the Brexit shock now and executives in the country have got over any uncertainty created by the decision in June for the U.K to leave Europe.
The economy in Germany has seen an increase in government spending due to a record number of migrants in 2015 whilst there has also been increased private consumption and a thriving construction sector, all of which have been boosted by record low interest rates.
Bucking the positive trend, industrial production did fall the most in July for 23 months whilst exports also posted their largest drop in a year adding to concerns over falling manufacturing demand from oversees especially in Asia.
ING economist Carsten Brzeski said:
“All in all, disappointing hard data in July and falling soft data since the Brexit vote had provided further evidence that the German economy was losing momentum,”
“Today’s Ifo index suggests that at least the Brexit fears have disappeared as quickly as they had emerged,” he added.
Economists have pressed that the country must not purely rely on national consumption and construction for growth and that it requires structural reforms and investments to spur on a new economic cycle.
The German economy saw growth of 0.4 percent during the quarter between April and June. Ifo economist Wohlrabe said that the economy during the third quarter continued to be robust however the second half of the year may see weaker growth although it does suggest the economy will continue to outperform the continents peers.