German business morale rose unexpectedly for the third month in a row in September, a new survey shows today.
This suggests that company executives in Europe's largest economy remain upbeat despite concerns of an economic slowdown in China.
The Munich-based Ifo institute said that the vast majority of survey responses had come before the Volkswagen emissions scandal erupted last Friday and that any economic impact from that would likely appear in next month's report.
Analysts have warned that the Volkswagen crisis over rigged emissions tests could develop into the biggest downside risk for Germany's export-oriented economy.
"We had expected that the export expectations of industry would have perhaps fallen a bit," Ifo economist Klaus Wohlrabe said, pointing to China. "They did not, they actually rose slightly."
Ifo's business climate index which is based on a monthly survey of some 7,000 firms rose to 108.5 in September from an upwardly revised 108.4 in August.
That was the strongest reading since May and compared with the Reuters consensus forecast for a drop to 108.
"The German economy looks in very robust shape," Wohlrabe said, noting that an influx of refugees had a positive impact on the retail sector.
Germany's government expects robust domestic demand and strong foreign trade to propel the economy this year, predicting 1.8% growth for 2015 after 1.6% in 2014.
Meanwhile, a survey among purchasing managers in German companies showed yesterday that the private sector remained on a growth path in September, suggesting that the economy as a whole grew by around 0.4 percent in the third quarter.
The Ifo showed that sentiment in the retail, wholesale and construction sectors improved while the sub-index for the manufacturing sector inched down.
German consumer morale declines again in October
Morale among German consumers declined for the second consecutive month heading into October amid global economic risks and uncertainty about the handling of a growing number of refugees, market research group GfK said today.
The GfK consumer sentiment indicator, based on a survey of 2,000 Germans, fell to 9.6 heading into October, from 9.9 a month ago.
This was the lowest reading since 9.3 in February. Today's reading also fell short of the Reuters consensus forecast of 9.8.
Economic concerns among German consumers increased significantly with the sub-index for economic expectations declining by a sharp 10.2 points to its lowest rate since November last year.
"This certainly has little to do with general domestic conditions, which remain very good in regard to employment, income and inflation. Rather, it is due to the fact that international conditions have recently become much more turbulent," GfK analyst Rolf Buerkl said.
The weaker economic outlook and a slowdown in the labour market had a negative effect on German consumers' income expectations and their willingness to buy, with both sub-indices declining to their lowest rate this year.
However, the figures are still at an overall high level and well above last year's readings.
Buerkl particularly points out effects on consumer morale of the growing number of refugees entering Germany, which expects at least 800,000 arrivals this year alone.
A continued influx in this order of magnitude will likely continue to affect consumer morale negatively and increase pressure on the labour market,GfK said.
"Whether the downward trend will continue will likely depend on how policymakers deal with international crises in the coming weeks and months, primarily the influx of refugees to Germany," Buerkl said.
