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08 December 2023

German business index edges higher in January

By Agencies
German business confidence posted a surprise gain in January, a key survey showed on Thursday, amid worries that the US economy was heading into a recession.

In the closely watched business climate index, calculated each month by the Munich-based economic research institute Ifo, the January reading edged up to 103.4 points from 103 points in December.

"The condition of firms in German industry and trade continues to be robust," a statement quoted Ifo president Hans-Werner Sinn as saying.

Market forecasts had expected a January level of 102 points as the economy also faced high oil and food prices, a strong euro and tight credit conditions following the meltdown of the US market for high-risk  – subprime – mortgages.

For its monthly survey, Ifo polls 7,000 companies about their assessment of current business and their expectations for the next six months.

The current situation sub-index dipped to 107.9 in January from 108.1 in December, while the expectations index rose to 99.0 points from 98.2.

Sinn said that in the manufacturing sector, the climate indicator and six-month outlook had improved, while current conditions were also brighter in construction.

Retail remained the soft point, with the overall indicator continuing a fall it began in November.

"January's surprise increase in the German Ifo index is an encouraging sign that, despite the recent very sharp falls in the German stock market, activity in the real economy is holding up pretty well for the time being," said Jennifer McKeown at Capital Economics.

The Frankfurt stock market took a battering on Monday and Wednesday amid a global panic that the US economy could be headed into recession.

"German companies obviously do not fear the US bogey-man at all, pricing in at least a slight acceleration in six month's time," added Andreas Rees at UniCredit.

But Sylvain Broyer at Natixis noted that "70 per cent of the answers to the Ifo survey came back until the deadline of January 15, two days before financial markets broke down."

"Expect a drop in business confidence next month," he warned. (AFP)