LDN - Business

German business morale brightens more than expected in April

[April 24, 2017] By Michael Nienaber

BERLIN (Reuters) - German business morale brightened more than expected in April, hitting its highest in nearly six years, a survey showed on Monday, suggesting Europe's largest economy is set to carry its robust upswing into the second quarter of this year.

The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, rose to 112.9 from an upwardly revised 112.4 in March.

The reading, the highest since July 2011, came in stronger than a Reuters consensus forecast for a value of 112.5.

"The German economy is growing strongly," Ifo chief Clemens Fuest said in a statement.

Ifo economist Klaus Wohlrabe told Reuters that the German economy was not being influenced by political uncertainties such as the threat of rising protectionism, major elections in Europe and the course of Brexit negotiations.

The survey was conducted in the first half of April, meaning it did not include any reaction to the first round of the French presidential election on Sunday in which centrist Emmanuel Macron came in first, qualifying for a May 7 runoff alongside far-right leader Marine Le Pen.

Managers' assessments of the current business situation improved significantly while their outlook for the coming six months was a bit less optimistic, it showed.

Morale improved in construction, retailing and wholesaling whereas managers in manufacturing were somewhat less upbeat.

In construction, assessments of the current business situation rose to a new record high while expectations remained broadly positive and the order level was excellent, Ifo said.

GOLDEN CYCLE

"The Ifo index continued its recent surge in April, increasing for the third consecutive month, suggesting that Germany's golden cycle has entered yet another round," ING economist Carsten Brzeski said.

"The only weak spot of the German economy remains rather sluggish investment," he noted, adding the government should focus on the import side of the trade surplus and further support domestic demand, preferably in the form of stimulating higher private and further increasing public investments.

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A steel-worker is pictured at a furnace at the plant of German steel company Salzgitter AG in Salzgitter, Lower Saxony on March 17, 2015. REUTERS/Fabian Bimmer/File Photo

Germany's gross domestic product grew by 1.9 percent last year, the strongest rate in five years, helped by a vibrant domestic economy which more than offset a drag from net trade.

Strong industrial output and export figures for January and February have suggested that the economy shifted into an even higher gear in the first quarter of 2017, helped by rising global demand for cars and machines.

Economists expect Germany's quarterly growth rate to clearly pick up in the January-March period after 0.4 percent in the final three months of 2016.

Germany's VDMA engineering association said earlier on Monday it could lift its growth forecast for this year if early signals of positive business sentiment persist and prove justified.

VDMA head Carl-Martin Welcker said higher demand from emerging markets such as Russia and India could lift German engineering production this year after a year of stagnation while China, the United States and Britain were sources of uncertainty.

The association, which represents thousands of companies with over a million workers and more than $200 billion in annual revenue between them, has forecast 1 percent growth this year in output and exports.

(Reporting by Michael Nienaber; Additional reporting by Irene Preisinger; Editing by Paul Carrel and Toby Chopra)

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