German Business Confidence Improves Unexpectedly

FRANKFURT-The mood among German business managers picked up further in September, despite a weakening growth outlook for China and other large developing economies.

The slowdown in the Chinese economy is not now dampening the confidence of German exporters, Ifo economist Klaus Wohlrabe told Reuters on Thursday. “They did not, they actually rose slightly”, Wohlrabe said. The corresponding index slid to 114 in September from 114.8 a month ago. Analysts surveyed by dpa-AFX had expected a slight drop in the index to 107.9 points.

“Companies assessed their current business situation slightly less favorably than in August”.

Kiel Institute for the World Economy said on September 10.

“But there are some reasons for caution”, the expert added. Both surveys were released before news of the Volkswagen scandal broke, with analysts uncertain as to whether it would knock confidence.

German auto giant Volkswagen is embroiled in a massive pollution cheating scandal that has sparked a United States criminal investigation and worldwide legal action with still unfathomable financial consequences for the auto giant.

“While the economic effects will not all be negative – indeed, the recall work will presumably boost activity – it would be no surprise to see sentiment in the German industrial sector fall in the next round of surveys”, Loynes said.

Earlier this month, the Ifo Institute forecast Germany’s current account surplus would rise to a record 250 billion euros ($280 billion) in 2015 from 216 billion euros previous year, driven by a rise in trade that has been lifted by a weak euro. “When looking at the latest events, headwinds should have been blowing strongly in the face of German companies”, said Andreas Rees of UniCredit Economics.