2018.08.2707:55:00UTC+00German Business Sentiment At 6-Month High

Germany's business confidence strengthened to a six-month high in August, weathering geopolitical risks and trade tensions.

The business sentiment indicator rose more-than-expected to 103.8 in August from 101.7 in July, survey results from the Mannheim-based Ifo Institute showed Monday.

This was the highest score since February and well above the expected score of 101.8.

Companies were once again more satisfied with their current business situation and business expectations were revised noticeably upwards.

The current situation index climbed to a five-month high of 106.4 from 105.4 a month ago. At the same time, the expectations index rose to 101.2 from 98.2 in July, marking the highest score since January.

In addition to a robust domestic economic situation, the truce in the trade conflict with the US contributed to improved business confidence, Ifo President Clemens Fuest said.

Fuest added that the German economy is performing robustly. Current figures point to economic growth of 0.5 percent in the third quarter.

However, a Bundesbank report released earlier this month said the German economy is set to remain on a sound growth path in the third quarter, but the pace of growth could end up being somewhat slower than the average for the first half of the year.

Looking ahead, the German economy should continue a multiple balancing act, Carsten Brzeski, an ING-DiBa economist, said.

"Balancing between strong fundamentals and increased geopolitical risks, between the favorable effects of the ECB's loose monetary policy and the lack of new structural reforms, between solid domestic demand and trade tensions," the economist added.

The survey showed that the business climate in manufacturing rebounded in August after six months of consecutive declines. The improvement was due to the clearly more optimistic expectations of the surveyed companies, especially in the auto sector.

In the service sector, confidence improved notably as service providers were more satisfied with their current situation amid noticeably strong optimism.

Business confidence in trade improved only slightly. Although retailers and wholesalers were a bit less satisfied with their current situation, skepticism about the six-month business outlook declined somewhat.

In construction, the business climate index continued at its record pace. Contractors were somewhat more satisfied with their current situation. In addition, they are much more optimistic regarding the coming half year.