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German business confidence surges

dpa logodpa 26/09/2016 Andrew McCathie

German business confidence has rebounded to a two-year high in September, according to the closely-watched Ifo survey.

German business confidence has surged to a more-than-two-year high in September, as optimism in the nation's boardrooms about the economic outlook climbed faster than forecast.

The Munich-based Ifo institute said its closely watched business confidence index rebounded to 109.5 points this month after falling to 106.3 points in August as industry put aside worries about the economic fallout from Britain's June decision to exit the European Union.

"German industry is expecting a golden autumn," Ifo chief Clemens Fuest said.

Based on a survey of about 7,000 executives, the monthly indicator is now at its highest level since May 2014.

The Ifo index's gain came on the back of rises in business confidence across all industrial sectors, which analysts said resulted in the index rising at its fastest monthly rate in about six years.

In particular, Ifo said confidence in the construction sector soared to a record high.

The latest Ifo index comes after a string of disappointing hard German economic data, which had raised worries that the nation's growth rate might lose momentum in the coming months.

But Andreas Rees, chief German economist with Italy's Unicredit Bank, said, "The fundamentals are sound."

In particular, he pointed to a jump in the manufacturing sector's export expectations as well as solid domestic demand resulting from buoyant consumer spending and a booming construction sector.

The business climate in Germany has not crashed since the British referendum on EU membership, said Joerg Kraemer, chief economist with Germany's Commerzbank.

He said this meant that "the strong increase in September can be partly interpreted as a relaxed approach to Brexit."

The September Ifo indicator showed that industry leaders' economic expectations for six months down the track rose more than forecast, while their assessment of current business conditions hit an all-time high.

While the indicator measuring business expectations climbed from 100.1 in August to 104.5 in September, the industry leaders' assessment of current business conditions increased from 112.9 to 114.7.

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