Business confidence in Germany rose unexpectedly during October to its highest level in more than three years, indicating that growth may not be as slow as forecasted by some economists.
Munich based Ifo institute on Thursday said that its business confidence index, determined by a poll of 7,000 executives, went up to 107.6 in October from 106.8 in the previous month, which is the highest level since 2007. Economists surveyed by Bloomberg News had predicted a decline to 106.5.
The rise in German exports helped the economy to expand by 2.2% during the second quarter, which was the fastest growth in two decades. While global demand for German goods and services may drop as the global economic recovery slows down, declining unemployment levels are restoring consumer confidence and boosting domestic spending. The German government more than doubled its growth prediction to 3.4% yesterday.
Today's report by Ifo “suggests that the euro zone’s largest economy is defying the global gloom", stated economist Jennifer McKeown of London-based Capital Economics Ltd. “Germany will continue to outperform for now, but it won’t be long before exports slow sharply".
Meanwhile, factory orders in Germany rose nearly four times as much as forecasted by analysts in August, consumer confidence increased to its highest level in three years during October and unemployment dropped for the 15th consecutive month during September.
"The German boom is much broader than just exports", according to economist Simon Junker of Frankfurt-based Commerzbank. “Investment goods are also in demand domestically. It’ll be a good year for profits.”
