German Confidence Rises Despite China Woes

German business confidence unexpectedly rose in August as companies brushed off concerns that China’s slowdown will drag on the nation’s economic growth.

The Ifo institute’s business climate index climbed to 108.3 from 108 in July. The median estimate was for a decline to 107.6, according to a Bloomberg survey of economists.

The Bundesbank said in its August monthly bulletin that Germany is poised for “solid” growth in the rest of the year. Domestic spending, bolstered by record-low unemployment and borrowing costs, could provide a bulwark against weakness in China, the nation’s third-biggest trading partner.

“Neither the Greek crisis nor the new Chinese uncertainties and stock-market turbulence have been able to dent German business optimism,” said Carsten Brzeski, chief economist at ING Diba AG in Frankfurt. “The German economic model has become much more balanced than critics have been complaining about.”

German overseas sales climbed 2.2 percent in the three months through June, according to data on Tuesday from the Federal Statistics Office in Wiesbaden. Private consumption rose 0.2 percent, while capital investment shrank 0.4 percent. The economy expanded 0.4 percent, matching an Aug. 14 estimate.

China, which devalued the yuan this month as it struggles to manage a slowdown, poses a risk as the country’s demand has been key for German companies in recent years. Germany’s trade deficit with China fell to the lowest this century in 2014 at about 5 billion euros ($5.8 billion). The gap has widened to 7.3 billion euros in the first half of 2015.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell