German Business Confidence At 5-Month High
May 25 2016 - 4:08AM
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German business confidence strengthened more-than-expected to a
5-month high in May as companies were more satisfied with their
current situation and turned noticeably optimistic regarding months
ahead despite "Brexit" fears, results of a key survey showed
Wednesday.
Consumer morale is set to strengthen in June as the economy is
expected to grow over coming months, a separate survey
revealed.
The business climate indicator rose to 107.7 in May from a
revised 106.7 in April, a monthly survey from the Ifo Institute
showed. This was the highest reading since December 2015 and above
the expected score of 106.8.
It's too early to celebrate though, as the Ifo increase is
merely compensation for the decline during the winter months, Joerg
Kraemer at Commerzbank said. Basically, the index is moving
sideways, and after the strong growth of the first three months,
things will return to normal, the economist added.
May's rise in the German Ifo suggests that the economy has
continued to grow at pretty healthy rates, but the fast quarterly
pace seen in the first quarter will not be sustained, Jennifer
McKeown, an economist at Capital Economics, said.
The economy had expanded 0.7 percent in the first quarter, the
strongest in two years.
The Munich-based Ifo Institute said the current conditions index
rose to 114.2 in May from 113.2 in the previous month and exceeded
the expected score of 113.4.
At the same time, the expectations index climbed to 101.6 from a
revised 100.5. Economists had forecast the score to rise to
100.8.
In manufacturing, the business climate improved for the third
straight month. Business confidence among wholesalers and retailers
recovered from April. At the same time, in construction, business
sentiment rose to a new record high since 1991.
However, the business confidence index in services weakened to
24.8 in May from 28.0 in April.
Elsewhere, the forward-looking consumer sentiment index rose to
9.8 in June from 9.7 in May, the market research group GfK said.
The score was forecast to remain unchanged in June.
While economic expectations and the propensity to buy both
increased in May, income expectations suffered losses.
The economic expectations index gained two points to 8.3 in May.
Consumers are assuming that the German economy will continue to
achieve positive growth, even though the rates of increase are
expected to remain rather moderate.
Meanwhile, the indicator for income expectations dropped 5.7
points to 51.8 points, losing a significant proportion of the gains
it enjoyed in April, GfK said.
In contrast to income expectations, the propensity to buy
indicator improved again on its already very high level. The index
rose 2.3 points to 57.7 points, which represents a 1-year high.
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