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(Bloomberg) — Germany’s business outlook brightened for a third month, a sign of resilience to higher energy prices and geopolitical uncertainty.
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An expectations index by the Ifo institute rose to 86.7 from a revised 84.3 the previous month. That’s higher than anticipated by anyone in a Bloomberg economist survey, which had a median estimate of 84.8. A gauge measuring current conditions unexpectedly retreated.
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“Despite the uncertain situation in the Persian Gulf, the German economy is showing less pessimism,” Ifo President Clemens Fuest said.
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The data come in a month that saw Germany’s government announcing reforms aimed at spurring economic growth. While those measures were well received, renewed hostilities in the Middle East and a surge in energy prices have since weighed on sentiment.
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Europe’s biggest economy is currently showing signs of stabilizing. July readings for PMIs and investor sentiment both surprised to the upside and the Economy Ministry said in its monthly report that recent data point to a recovery in the second half.
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Still, the situation in the Gulf region continues to pose a significant risk to Germany’s export-oriented economy. Second-quarter output numbers due Thursday will probably show a slowdown to just 0.1% growth in the period.
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German car manufacturers are another source of concern. The country’s automakers are rapidly losing market share in China, an important export market.
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Just last week, Volkswagen AG warned that sales may fall further and now sees its revenue decline as much as 3% this year. The company has also floated eliminating as many as 50,000 more jobs globally.
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—With assistance from Kristian Siedenburg, Harumi Ichikura and Joel Rinneby.
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