German business confidence missed estimates even as it rose for a fifth month in September amid caution over the recovery in the euro area, the nation’s biggest trading partner. The euro fell.
The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 107.7 from a revised 107.6 in August. That compares with a median forecast of 108 in a Bloomberg News survey of 43 analysts. It’s still the highest level since April 2012.
Europe’s largest economy is benefiting from unemployment near a two-decade low and the end of the euro area’s longest-ever recession. Angela Merkel is poised for a third term as German chancellor after her Christian Democrats took the largest share of the vote in Sept. 22 elections on the strength of her economic record. She’s now trying to form a coalition as her traditional allies, the Free Democrats, were ousted from parliament.
“We are in growth territory, but not in runaway growth territory,” said Christian Schulz, senior economist at Berenberg Bank in London. “The debate in Germany is shifting to the center-left; we’re going to see more of a focus on fairness, perhaps higher taxes, a bit higher spending. In the short term a government investing more is good for growth.”
A measure of the current situation unexpectedly dropped to 111.4 in September from 112 the prior month, today’s report showed. A gauge of expectations climbed to 104.2 from 103.3. The survey was conducted before Germany’s election, according to Ifo.
The euro dropped after the data and was little changed at $1.3501 at 10:23 a.m. Frankfurt time. It was as high as $1.3519 before the report.
German investment in plant and machinery increased for the first time since 2011 in the second quarter. Unemployment was at 6.8 percent in August.
Daimler AG, the world’s third-largest maker of luxury vehicles, said this month that it’s having trouble filling orders as August sales at an all-time high put premium-car manufacturers on course for record full-year deliveries.
Porsche AG, the Volkswagen AG unit that builds the 911 sports car, said it will reach a target of selling more than 200,000 vehicles a year in 2015 or 2016, about three years earlier than initially planned. Investments in expanding and modernizing factories around its hometown in Stuttgart, Germany, will exceed 1 billion euros ($1.32 billion) by 2018, Matthias Mueller, the head of the Porsche brand, said on Sept. 5.
While the economy is showing signs of growth, the pace is uneven, according to the Bundesbank. German factory orders, industrial production and exports all declined in July, and a preliminary gauge of manufacturing for September unexpectedly dropped.
“At the start of summer 2013, the German economy didn’t sustain the rebound from earlier in the year,” the Frankfurt-based central bank said in its monthly report yesterday. “Company investment confirms the evidence of a solid foundation, though signs of a dramatic upswing are lacking.”
The Bundesbank predicts the German economy will expand 0.3 percent this year and 1.5 percent in 2014. The European Central Bank forecasts the 17-nation euro-area economy will shrink 0.4 percent in 2013 and grow 1 percent next year. The currency bloc’s gross domestic product expanded 0.3 percent in the three months through June, snapping six quarters of contraction.
ECB President Mario Draghi has pledged to keep the bank’s official interest rates at or below current levels for an extended period of time to support the recovery. He said yesterday that the ECB is ready to use another longer-term refinancing operation if needed to curb market rates. The bank introduced two three-year LTROs starting in December 2011 to ease a credit crunch in Europe.
The region’s economy is still showing signs it’ll sustain its growth. A gauge of euro-area services, based on a survey of purchasing managers by London-based Markit Economics, climbed this month to the highest level in more than two years. Investor confidence in Germany rose to the highest level in more than three years, according to the ZEW research institute.
“Germany is having a good but not roaring recovery,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “We’ve seen a row of good data and companies do have expectations of better export performance.”
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