German business confidence grows for first time in six months, pushing up Dax stock index

Confidence among German business leaders has improved for the first time in six months, pushing the country’s Dax stock index up 0.45 per cent since the news was announced.

However, in manufacturing business sentiment weakened once again amid declining demand, the Ifo Institute’s monthly Business Climate Index revealed.

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In services, trade, and construction the index rose, helping push the overall index’s score up to 99.6 from historical lows. In February, the index, which indicates firms’ assessment of the current business situation and their expectations, fell to 98.7, well below the long term average of over 100.

The yield on 10-year German government bonds – or bunds – briefly rose above zero following the news, while the euro has this morning risen 0.2 per cent against the dollar.

President of the Ifo Institute, one of Germany’s major economic think tanks, Clemens Feust, said: “The companies are somewhat more satisfied with their current business situation, and they are decidedly more optimistic regarding business in the coming six months. The German economy is showing resilience.”

“In the services the index rose noticeably, mainly as a result of clearly more optimistic expectations. The service providers gave more positive assessments to their already favorable business situation,” he said.

On manufacturing, however, he said: “With declining demand, businesses hardly expect any more increases in production.”

The overall increase in optimism among German businesses economy comes as a surprise for an economy that is teetering on the brink of recession following a collapse in manufacturing output and demand.

Last week it was announced that Eurozone manufacturing activity had hit a six-year low, according to the IHS Markit Eurozone composite purchasing managers’ index (PMI).

Read more: Euro drops as Eurozone manufacturing activity hits six-year low

Chief analyst at Nordea, Jan von Gerich, said on Twitter: “The rebound in the German Ifo index was welcome, but the further fall in manufacturing confidence keeps risks firmly tilted to the downside.”