German business confidence up

German business confidence improved in July, as temporary relief over Greece brightened the mood, industry data showed on Monday.

The Munich-based Ifo economic institute said Wednesday that its closely watched business confidence indicator climbed to 108 points from 107.5 in June. It is still being bolstered by a weak euro exchange rate and low energy prices, said Carsten Brzeski, chief economist at ING-DiBa in Frankfurt.

Ifo president Hans-Werner Sinn said the easing of the crisis had helped boost sentiment in Germany.

The Ifo indicator measuring business expectations for the next six months rose to 102.4 in July from 102.1 in June. Assessments of the current business situation improved significantly after last month’s setback. The business prospects too were somewhat more optimistic after three consecutive declines.

The monthly index is based on a survey of around 7,000 German firms in the manufacturing, construction, wholesale and retail sectors. Risks looking ahead include longer-than-expected periods of weakness of the US and the Chinese economies, both of which are major German export destinations, and a possible new flaring of the Greek crisis, he said.

Berenberg Bank’s Holger Schmieding wrote that “German businesses, who tend to react sensitively to any global disturbance, are shrugging off the Greek noise” with the surprise rise in business confidence.

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

Jennifer McKeown, senior economist at Capital Economics, said the Ifo survey showed the recovery was continuing despite Greece’s woes, albeit without gaining much momentum. That beat the Reuters consensus for a drop to 107.2 and sent the euro up to a two-week high against the dollar.

She warned, however, that sentiment in Germany could deteriorate again as negotiations in Greece could stumble.