German IFO index retreats less than expected in September
Gauge of manufacturing expectations edges higher, despite Volkswagen
Construction to benefit from migrant crisis
Eurozone, US offsetting China
Updated : 16:23
The Volkswagen scandal barely left a scratch on German businesses’ confidence in October, a survey from a leading think-tank revealed.
The IFO institute’s business confidence index for the month of October slipped to a reading of 108.2 from September’s 108.5.
Economists had pencilled in a print of 107.8.
Volkswagen mishap leaves no dents
“Surprisingly, the VW scandal did not play any role at all. Sentiment in the auto industry even improved!
“The overall manufacturing sector also held up well. As repeatedly said, we think that impulses from the US and the Eurozone will overcompensate for the weakness coming from emerging markets,” said Andreas Rees, chief German economist at Unicredit.
“Today’s marginal decline is a massive positive surprise.”
A gauge of how firms’ valued the current situation retreated to 112.6 from 114 in the prior month (consensus: 113.5).
However, a sub-index of companies’ expectations improved to a reading of 103.8 after a print of 103.3 for the month before (consensus: 102.4).
Rees also highlighted the slight rise seen in the expectations component for manufacturing as proof demand from the Eurozone and US was more than offsetting weakness out of China.
Construction to benefit from refugee crisis, retail sector OK
The economist also saw signs of a shift in the composition of growth towards internal demand in the data.
“In the construction industry, we even have to fasten our seatbelts. Business expectations hit their second-highest level since reunification at the start of the 1990s.”
Increased demand for housing as a result of the refugee crisis will add to demand for housing he said.
A barometer of the business climate in retailing worsened to a reading of 10.9 from 14.7 in the prior month, but Unicredit said it should be seen as payback for the strength seen in prior months.
“The economic difficulties in major emerging markets are restraining achievable German growth momentum at present, but are most unlikely to derail the upswing as such,” added Timo Klein, senior economist at IHS Economics.