German business confidence surged to the highest in more than 1 1/2 years in November, signaling that the economic recovery in Europe’s largest economy remains on track even after growth slowed in the third quarter.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 109.3 from 107.4 in October. That’s the highest since April last year and exceeds all 43 economist forecasts in a Bloomberg News survey.
The median was for an increase to 107.7.The Bundesbank said this week that the German economy remains on a “solid growth path.” Investor confidence rose to the highest level in four years in November, unemployment remained near a two-decade low in October and factory orders rose more than economists predicted in September.
The Ifo index “continues its underlying upward trend, which is consistent with a progressive improvement of the economy,” said Annalisa Piazza, an economist at Newedge Group in London. “Prospects for the future remained bright in November.”
A measure of current conditions rose to 112.2 in November from 111.3, while a gauge of expectations jumped to 106.3 from 103.7, Ifo said. The euro rose more than a quarter of a cent after the report and traded at $1.3513 at 10:09 a.m. Frankfurt time.
Domestic Demand
Gross domestic product grew 0.3 percent in the third quarter after a 0.7 percent expansion in the three months through June.
Growth was driven exclusively by domestic demand, the Federal Statistics Office in Wiesbaden said today. Capital investment rose 1.6 percent in the three months through September from the prior quarter and construction increased 2.4 percent, it said.
Economists surveyed by Bloomberg News predict quarterly growth for Germany of 0.4 percent until the first quarter of 2015.
The European Commission forecasts the economy will expand 1.7 percent next year. Beiersdorf AG (BEI), the Hamburg-based maker of Nivea hand cream, raised its full-year sales forecast this month and said its Tesa unit, which produces adhesive tapes for electronics and automotive industries, will report stronger annual sales growth than expected.
Growth Engine
While Germany remains the euro area’s growth engine, the country faces headwinds including political uncertainty at home and slowing growth in the 17-nation currency bloc. Chancellor Angela Merkel is still locked in negotiations to form a government two months after her Christian Democratic bloc won a general election.
A group of economic advisers said last week that possible compromises made to form a coalition with the Social Democrats, including a minimum wage and higher pensions, risk rolling back reforms that helped the economy.
Euro-area GDP expanded 0.1 percent in the third quarter after the economy emerged from recession in the three months through June. Italy extended a record-long contraction and the French economy, Germany’s biggest trading partner, unexpectedly shrank as businesses held off on investment.
The growth numbers came a week after the European Central Bank reduced its benchmark interest rate to a record low of 0.25 percent, citing the possibility of a prolonged period of low inflation and downside risks to the economy.
“Europe’s economy is still fragile and Germany faces risks from a slowdown in France,” said Hiroki Shimazu, senior market economist at SMBC Nikko Securities Inc. in Tokyo. “But I think Germany is strong enough to support the euro area economically over the next year and I believe we’ll see growth both in Germany and the euro area.”
bloomberg.com
The Ifo institute’s business climate index, based on a survey of 7,000 executives, increased to 109.3 from 107.4 in October. That’s the highest since April last year and exceeds all 43 economist forecasts in a Bloomberg News survey.
The median was for an increase to 107.7.The Bundesbank said this week that the German economy remains on a “solid growth path.” Investor confidence rose to the highest level in four years in November, unemployment remained near a two-decade low in October and factory orders rose more than economists predicted in September.
The Ifo index “continues its underlying upward trend, which is consistent with a progressive improvement of the economy,” said Annalisa Piazza, an economist at Newedge Group in London. “Prospects for the future remained bright in November.”
A measure of current conditions rose to 112.2 in November from 111.3, while a gauge of expectations jumped to 106.3 from 103.7, Ifo said. The euro rose more than a quarter of a cent after the report and traded at $1.3513 at 10:09 a.m. Frankfurt time.
Domestic Demand
Gross domestic product grew 0.3 percent in the third quarter after a 0.7 percent expansion in the three months through June.
Growth was driven exclusively by domestic demand, the Federal Statistics Office in Wiesbaden said today. Capital investment rose 1.6 percent in the three months through September from the prior quarter and construction increased 2.4 percent, it said.
Economists surveyed by Bloomberg News predict quarterly growth for Germany of 0.4 percent until the first quarter of 2015.
The European Commission forecasts the economy will expand 1.7 percent next year. Beiersdorf AG (BEI), the Hamburg-based maker of Nivea hand cream, raised its full-year sales forecast this month and said its Tesa unit, which produces adhesive tapes for electronics and automotive industries, will report stronger annual sales growth than expected.
Growth Engine
While Germany remains the euro area’s growth engine, the country faces headwinds including political uncertainty at home and slowing growth in the 17-nation currency bloc. Chancellor Angela Merkel is still locked in negotiations to form a government two months after her Christian Democratic bloc won a general election.
A group of economic advisers said last week that possible compromises made to form a coalition with the Social Democrats, including a minimum wage and higher pensions, risk rolling back reforms that helped the economy.
Euro-area GDP expanded 0.1 percent in the third quarter after the economy emerged from recession in the three months through June. Italy extended a record-long contraction and the French economy, Germany’s biggest trading partner, unexpectedly shrank as businesses held off on investment.
The growth numbers came a week after the European Central Bank reduced its benchmark interest rate to a record low of 0.25 percent, citing the possibility of a prolonged period of low inflation and downside risks to the economy.
“Europe’s economy is still fragile and Germany faces risks from a slowdown in France,” said Hiroki Shimazu, senior market economist at SMBC Nikko Securities Inc. in Tokyo. “But I think Germany is strong enough to support the euro area economically over the next year and I believe we’ll see growth both in Germany and the euro area.”
bloomberg.com
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