German Ifo business climate index rises above market expectations in August; EUR/USD trades flat

Business confidence in German firms has improved noticeably. The ifo Index rose to 103.8 points in August after 101.7 points in July. The companies were once again more satisfied with their current business situation. Business expectations were revised noticeably upwards. In addition to a robust domestic economic situation, the truce in the trade conflict with the US contributed to improved business confidence.

The German economy is performing robustly. Current figures point to economic growth of 0.5 percent in the third quarter. In manufacturing, the index has risen after six consecutive declines. The rise was due to the clearly more optimistic expectations of the surveyed companies, especially in the automotive industry. Companies are increasingly planning to step up production.

By contrast, the very favourable current business situation was rated a little less positively. In the services sector, the business climate has improved significantly. The service providers were more satisfied with their current business situation. Their expectations were noticeably more optimistic. The rise in the expectation component was as steep as it last was in June 2009. In trade, the index has risen slightly.

Although retailers and wholesalers were a bit less satisfied with their current situation than in the previous month, scepticism about the six-month business outlook declined somewhat. In construction, the business climate index continued at its record pace. The contractors were somewhat more satisfied with their current situation. In addition, they are much more optimistic regarding the coming half year.

Meanwhile, EUR/USD traded nearly flat at 1.1616 at the time of writing during Monday’s European session.