German business sentiment 'jubilant': Ifo

 

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.

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

Fuest said that "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.

- 'Booming labour market' -

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 labour 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 labour market and record-low unemployment," he wrote in a note.

"Furthermore, despite some temporary loss in momentum, the broader trend in global trade activity is likely to continue, which in turn bodes well for German export-dependent manufacturers.

"And with the recovery in global trade expected to continue, a pick-up in investments is very likely to follow suit."

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