Survey shows unexpected upturn in German business confidence

BERLIN (AP) — A closely watched survey shows that business confidence in Germany, Europe’s biggest economy, has posted an unexpected rise this month as worries over Greece subsided.

The headline IFO Business Climate Index came in at 108 points during the seventh month of the year, above the 107.4 booked in June.

“In the eyes of German businesses, the external tailwinds, stemming from low energy prices and a weak euro, clearly outweigh any downside risk from the Greek crisis on the German economy”, said ING Bank chief economist Carsten Brzeski.

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The institute’s president, Hans-Werner Sinn, said in a statement that “the recent easing of the Greece situation contributed to stronger sentiment in the German economy”.

After months of crisis talks and fears Greece would crash out of the euro common currency, eurozone ministers and Athens have agreed to resume talks for a third EU-IMF bailout.

Assessments of the current business situation improved significantly after last month’s setback. The only cause for concern for many investors and analysts are the longer than expected weakness of the US and Chinese economies both of which are major German export destinations and a possible new showdown between the Greece government and its worldwide creditors.

Another supporting factor was the nuclear deal Iran reached with world powers.

EUR/USD was trading at 1.1101 from around 1.1088 ahead of the release of the data, while EUR/GBP was at 0.7152 from 0.7148 earlier. The Ifo is more sensitive to sentiment than the PMIs or the ZEW. The median estimate was for a decline to 107.2, according to a Bloomberg survey of economists.