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Frankfurt - German business sentiment surged to a record high in June amid signs that the outlook for Europe’s largest economy is improving.
The Munich-based Ifo institute’s business climate index rose to 115.1 from 114.6 in May. That’s the highest since 1991 and compares with a median estimate for a decline to 114.5 in a Bloomberg survey of economists.
“The inexplicable euphoria seems to be continuing,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “Ifo and Purchasing Managers’ Indexes were already much too optimistic compared to the real numbers in the first quarter, and now they’re even more optimistic and will continue to be so in the second quarter vis-a-vis the actual numbers.”
The German economy expanded at the fastest pace in a year in the three months through March, and reports have underlined expectations for a continued robust performance. Earlier this month, Germany’s Bundesbank raised its growth forecasts through 2019, arguing a healthy labour market and strong demand would ensure an “ongoing solid underlying pace” of expansion.
“Sentiment among German businesses is jubilant,” Ifo President Clemens Fuest said in a statement. “Germany’s economy is performing very strongly.”
Ifo’s measure of current economic conditions in Germany improved to 124.1 in June from a revised 123.3. A gauge of expectations rose to 106.8 from 106.5.
Companies in the country’s manufacturing sector have seen the strongest momentum since 2011 this year, while activity in the services sector slowed, according to PMIs published on Friday. Second-quarter gross domestic product data will be published on August 15.
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