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The Ifo economic institute said on Monday its closely-watched
business climate index jumped to 103.8, beating July's reading
of 101.7 and a Reuters consensus forecast of 101.9.
U.S. President Donald Trump agreed during a meeting with
European Commission President Jean-Claude Juncker last month to
refrain from imposing tariffs on European cars while the two
sides negotiate to cut other tariffs.
"The truce between Juncker and Trump is clearly providing
relief," Ifo economist Klaus Wohlrabe told Reuters, adding that
export expectations in Europe's largest economy had risen
significantly after dropping in July.
The August reading was the highest since February and marked the
strongest monthly improvement since December 2014.
Ifo chief Clemens Fuest also cited robust domestic conditions.
"The German economy is performing robustly. Current figures
point to economic growth of 0.5 percent in the third quarter,"
he said.
'NO CRISIS'
German companies were once again more satisfied with their
current situation and their business expectations were revised
noticeably upwards, the survey showed.
The main support came from services and construction, a sector
breakdown showed. But business sentiment also improved slightly
in manufacturing and retailing.
August's IHS Markit sentiment survey among purchasing managers
also showed the private sector shifting into a higher gear,
helped by strong services activity.
"The global trade dispute so far hasn't turned out to be a
sentiment killer," Alexander Krueger from Bankhaus Lampe said.
"Everything is pointing to a continuation of the robust
upswing."
MORE OPTIMISTIC
Ifo's Wohlrabe said the strong domestic situation was also
outweighing uncertainty caused by Britain's planned departure
from the EU and the Turkish lira crisis. "We expect full-year
economic growth of 1.8 or even 1.9 percent," he said.
The German economy grew 0.5 percent quarter-on-quarter in the
April-June, helped by construction, state spending and private
consumption.
However, a larger-scale trade dispute between the United States
and China could also harm Germany, many of whose manufacturers
rely on growth in the world's two largest economies.
"Up to now, talks and fears of new crises, trade wars or a
sudden end to a mature cycle have only been talks and threats,"
ING analyst Carsten Brzeski said, adding all those concerns had
not left any significant marks on the German economy yet.
The economy was set to continue its balancing act between the
favorable effects of the European Central Bank's loose monetary
policy and a lack of new structural reforms as well as between
solid domestic demand and trade frictions, Brzeski said.
(Additional reporting by Joern Poltz and Rene Wagner; editing by
John Stonestreet and David Stamp)
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