Germany: German business confidence continues to surprise, jumps to over two-year high in October

German business confidence continued its upswing in October. The business confidence index, elaborated by the Ifo Institute, increased from September’s 109.5 to 110.5 in October. The result marked the highest reading since April 2014 and contrasted market expectations that the index would remain at September’s level.

According to the Institute, the improvement mainly reflects that firms became more optimistic about future business development, with the relevant sub-indicator hitting a two-year high. Companies were also more positive about their current business situation.

The Ifo Institute sees October’s print as a sign that, “the upturn in the German economy is gathering impetus.” Sentiment rose in the manufacturing and construction sectors, with the latter continuing its record-breaking path. However, business sentiment fell in the wholesale sector and remained broadly stable in the retail sector.

FocusEconomics Consensus Forecast panelists expect gross fixed investment to expand 2.4% in 2016, which is down 0.1 percentage points from last month’s forecast. In 2017, the panel sees investment growth accelerating 1.9%, which is unchanged from last month’s estimate.