German business climate hits record as economy proves robust

[FRANKFURT] German companies seem to be unfazed about the summer lull heading their way.

The business climate in Europe's largest economy improved for a sixth month in July, according to Munich-based Ifo institute.

The index, based on a survey of 7,000 German companies from manufacturing, trade and construction, rose to 116.0 from a revised 115.2 in June.

That's the highest level since 1991 and compares with a median estimate in a Bloomberg survey for a drop to 114.9.

Ebullient sentiment suggests the German economy's very strong performance at the start of the year is set to spill over into the second half. Steadily declining unemployment has been supporting domestic demand and the Bundesbank predicts that "lively" export demand will turn manufacturing into a leading growth driver.

"Sentiment among German businesses is euphoric," Ifo President Clemens Fuest said in a statement.

"Germany's economy is powering ahead."

The German economy grew at the fastest pace in a year in the first quarter and the International Monetary Fund expressed confidence in the country's growth prospects when it lifted its outlook through 2018 earlier this month. Expansions of 1.8 per cent in 2017 and 1.6 per cent next year will be supported by robust domestic demand and strengthening global trade, the lender said.

Ifo's measure of current economic conditions improved to 125.4 from a revised 124.2, and a gauge of expectations rose to 107.3 from 106.8.

Second-quarter gross domestic-product-data will be published on Aug 15.

BLOOMBERG