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German business confidence going from record to record

November 24, 2017

Once again the latest monthly business confidence index by Germany's Ifo research institute shows the mood among German executives only keeps getting rosier despite political unease over the next German government.

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Steel worker at ThyssenKrupp
Image: picture-alliance/dpa/R. Vennenbernd

A much anticipated monthly survey shows that German business confidence hit another record high in November, as companies shrugged off the political uncertainty in Europe's booming top economy.

The Munich-based Ifo Institute released its latest business climate indicator on Friday which beat analysts' expectations and climbed to 117.5 points in November from 116.8 the previous month, itself a record high.

Businesses assessed their current situation as slightly worse, at 124.4 points from 124.8 the previous month; but their expectations for the next six months rose to 111.0 points from 109.2 in October.

Low-key German firms boast high performance

"Sentiment among German businesses is very strong," Ifo President Clemens Fuest said in a statement. "The German economy is on track for a boom."

Accordingly amid record-high employment, rising real wages and an increase in exports, the German government last month raised its economic growth forecast for 2017 from 1.5 to 2.0 percent, while Ifo lifted its estimate from 1.9 to 2.3 percent.

The political cloud over Germany

The spike in business morale comes as Germany is searching for a way out of a political impasse after weeks of arduous coalition talks to form a new government collapsed on the weekend.

The institute pointed out that 90 percent of the firms who took part in the survey responded before the talks broke off late Sunday between Chancellor Angela Merkel's conservatives, the Greens and the liberal Free Democrats.

"The first real test of how politics are currently impacting business sentiment will only come with the December Ifo index," said economist Carsten Brzeski of ING Diba bank.

Despite this he thinks that in the short term "political uncertainty should hardly have any impact on growth."

The index is based upon about 7,000 monthly survey responses from firms in the manufacturing, construction, wholesaling and retailing sectors. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. To make the statistics comparable, all figures are normalized to the average of the base year 2005.

tr/uhe (AFP, AP, Ifo)