German business sentiment rose strongly in August to its highest level in nearly a year, boosting expectations that the euro zone's largest economy will lead a recovery in the region in the coming months.
The Ifo think tank said this morning its business climate index, based on a monthly poll of some 7,000 firms, rose to 90.5 from an upwardly revised 87.4 in July. A Reuters poll of 45 economists had pointed to a reading of 88.9.
The rise chimed with other data showing Germany is rallying from its deepest post-war recession, and could offer support for Chancellor Angela Merkel before a federal election on September 27th.
"We think that Germany will be the star performer within the euro zone over the coming months, reflecting its status as an export powerhouse," said Fortis Bank economist Nick Kounis.
The euro briefly rose against the dollar after the release of the data, before giving up the gains. Ifo's headline reading rose for the fifth month in a row, hitting its highest level since September 2008.
News of the rise followed a report yesterday which showed Germany exited recession in the second quarter, despite a massive drop in inventories, and that restocking by firms could spur the economy to faster growth.
Net trade contributed to the 0.3 per cent growth in the economy in the second quarter as a sharp drop in imports outpaced a decline in exports, and analysts believe Germany's export engine will profit from rising demand in foreign markets.
“Global demand is picking up again and Germany, the world's leading export nation, is profiting from that,” said Alexander Koch, economist at UniCredit.
Many economists expect solid growth in the third quarter. German firms have already reported signs of a stabilisation in business as the economy emerges from its deepest post-war recession, which saw four straight quarters of contraction.
A jump in output and expanding order books pulled the private sector out of an 11-month slide and returned it to growth in August, a purchasing managers' survey showed on Friday.
Steelmaker ThyssenKrupp also said earlier this month the construction, automotive, shipbuilding and machinery industries that dominate its customer base showed signs in June of pulling out of a slump that curbed demand for its products.
Reuters