German business confidence resilient despite manufacturing wobbles

German business confidence has remained resilient as optimism from construction, retail and services companies outweighed cautiousness from the powerhouse manufacturing sector and signs of weakening foreign demand for the country’s exporters.

The Ifo Institute business climate index edged 0.1 points lower to 103.7 in September, beating the 103.2 economists had anticipated according to a poll for Thomson Reuters.

The assessment of current conditions was the same as in August, with the sub-index defying expectations of a drop to hold at 106.4, while future expectations were also only a whisker lower than the previous month at 101 down from 101.2.

Although it dates from July, the latest industrial production data were much weaker than expected, pointing to prolonged weakness in the German economy after a buoyant end to 2017.

Data from the institute showed a fall in the manufacturing sector, due to “far poorer assessments of the current business situation” – though sentiment was still “way above” the long term average, Ifo said. The sector is starting to anticipate an end to the relative gloom of late, however, with business expectations at their highest level since February and factories planning to ramp up production in the coming months.

Retailers and construction businesses both upgraded their assessment of both the current business situation and future expectations, with contractors particularly optimistic: the construction business climate index and its sub-components hit new record highs in September, according to the institute.

“Despite growing uncertainty, the German economy remains robust,” the institute added.

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