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German business morale at record high despite Angela Merkel’s stalled coalition talks

Business morale in Germany unexpectedly surged to a record high in November, providing further evidence that the economy is on track for a strong fourth quarter in terms of economic growth – a sharp contrast to the situation in the UK.

The Ifo economic institute, in its widely watched monthly update, said that an index measuring business climate in the county, which is based on a survey of around 7,000 companies, rose from 116.8 in October to 117.5 this month.

This is a higher figure than the consensus forecast in a poll of analysts and economists.

“Sentiment among German businesses is very strong,” said Ifo chief Clemens Fuest. “This was due to far more optimistic business expectations. The German economy is on track for a boom.”

Germany’s economy is expanding at a healthy pace, in sharp contrast to the UK, where the Treasury’s official forecasting body this week dramatically slashed its forecast for economic growth this year and next.

Data this week showed that real Germany’s GDP growth was 0.8 per cent in the quarter to the end of September, compared to the UK’s 0.4 per cent growth, particularly propped up by robust exports and rising business investment. And it’s on track to sustain a healthy pace of expansion well into 2018.

In fact, Markit’s flash composite Purchasing Managers’ Index, released yesterday, showed that German factories had produced goods at their fastest pace in almost seven years this month, indicating that Chancellor Angela Merkel’s failure to form a coalition government has done little to dent sentiment. 

“This economic locomotive will overpower the political uncertainty, at least for now,” said Yann Quelenn, an analyst at online financial and trading services provider Swissquote, commenting on the latest Ifo figures.

Economists at Barclays said that Germany was experiencing a “moment of glory”.

 

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