Germany Business Confidence


Businesses relatively confident despite VW scandal

German business confidence was more robust than expected in October despite the Volkswagen emission scandal. The business confidence index, elaborated by the Ifo Institute, came in at 108.2 in October, which was just below September’s 108.5. The reading overshot market expectations of a decrease to 107.8. According to the Institute, October’s result reflects that firms grew slightly more confident about future business development. In contrast, businesses were somewhat less upbeat about the current situation.

Regarding the different economic sectors, sentiment rose for a third consecutive month in construction while it remained unchanged in the wholesale sector. Conversely, sentiment deteriorated for a third straight month in the manufacturing sector. Nevertheless, the Ifo Institute highlighted that, “indeed the Volkswagen scandal has had no impact on the German automotive industry. The climate index for the automotive sector even continued to rise this month. Assessments of the current business situation and business expectations both improved. Firms plan to ramp up production. Exports, however, are not expected to provide further stimuli.” Sentiment among retailers dropped, mainly on the back of a worse assessment of the current business situation. The view of the Ifo Institute is that October’s print suggests overall that, “the German economy is proving remarkably resilient in view of this autumn’s multiple challenges.”

FocusEconomics Consensus Forecast panelists expect gross fixed investment to expand 2.4% in 2015, which is down 0.1 percentage points from last month’s forecast. In 2016, the panel sees investment growth accelerating to 2.9%, which is down 0.2 percentage points from last month’s Consensus.

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Germany Business Confidence Chart

Germany Business Confidence October 2015

Note: Ifo Business Climate Index, 2000=100.
Source: Ifo Business Survey.

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