German business morale unfazed by Paris attacks

BERLIN - Agence France-Presse

In the key manufacturing sector, the upbeat outlook reached the highest level since March in Germany, indicating that production ‘will be ramped up.’ AFP Photo

German business confidence bounced back in November as Europe’s top economy shrugged off global uncertainty and the deadly jihadist assault in Paris, a leading economic think tank said yesterday. 

The Ifo institute’s closely-watched business climate index rose to 109 points in November from 108.2 points in October, Ifo said in a statement, surprising analysts polled by financial services firm Factset who had expected another dip to 108.1.

“The German economy remains unaffected by growing uncertainty worldwide,” Ifo president Hans-Werner Sinn said in a statement.

“Not even the Paris attacks had a negative impact on survey data.”  
 
For its survey, Ifo quizzes companies about their current business environment and the outlook for the next six months.

A sub-index measuring current business climbed to 113.4 points while the outlook sub-index rose for the third consecutive month to 104.7 points, it said.

‘Interesting reactions’

In the key manufacturing sector, the upbeat outlook reached the highest level since March, indicating that production “will be ramped up in the months ahead.”

A sub-index for the automotive sector continued to rise despite the emissions scandal at Volkswagen, Ifo said.

“German businesses showed an interesting reaction to the recent series of uncertainties and turmoil,” economist Carsten Brzeski said.    

“In fact, despite not so positive hard data and new uncertainties stemming from the refugee influx and latest events in Paris, German businesses remain a bunch of optimists.”
          
Capital Economics analyst Jennifer McKeown said the survey pointed to an economy in rude health despite mounting risk factors.

 “The rise in expectations is a particularly encouraging sign that neither previous evidence of a slowdown in China nor the Volkswagen scandal have dented confidence,” she said.

She warned that some 80 percent of the Ifo responses were taken before November 13 so that a negative impact from the Paris attacks could still surface.  
  
 “Overall, the survey paints an encouraging picture,” she said.

“But we still suspect that German growth will slow next year as recent boosts from rock bottom inflation and a weak euro fade. We have penciled in a 1.2-percent rise in GDP to follow 1.5 percent growth this year.”
     
The latest figures suggest that Germany is no longer just an export-oriented economy, but that consumption is fast becoming a key pillar of output.