German Ifo Business Climate Index Falls Less Than Expected
Further evidence that German companies are, for now at least, shrugging off Brexit worries came on Monday as the closely watched Ifo index of business sentiment fell less than expected in July.
The Munich research group said its business climate index deteriorated only slightly in July to 108.3 from 108.7, ahead of the 107.5 reading that Ifo's survey of about 7,000 companies was expected to generate. Companies' expectations also held up better than expected, while their assessment of the current situation unexpectedly rose.
The Ifo data pointed to declining confidence among manufacturers and wholesalers, but strength in the construction sector as the business climate indicator for that industry climbed to a record high.
The survey comes after Markit Economics' purchasing managers' indices out on Friday pointed to resilience in the wake of the U.K.'s Brexit vote. The German composite and services purchasing managers' indices unexpectedly rose in July, while the manufacturing index fell less than expected. By contrast, weak purchasing managers' indices in the U.K. pointed to third-quarter economic contraction of 0.4%, according to Markit.
But Capital Economics sounded a note of caution on today's data on Germany.
The Ifo survey "offers some encouraging evidence that the immediate effect of the U.K. referendum on the German economy has not been too severe. Indeed, we have argued that Germany is less vulnerable than others to the effects of the vote and we doubt that it will blow the recovery off course," they wrote. "However, while GDP should rise by 1.5% or a bit more this year, we still think that a slowdown is to come."
German 10-year bond yields were recently up 2 basis points at minus 0.01% as news of the country's resilience dimmed the allure of the securities as a safe haven.
The Dax was recently up 0.91% at 10,239.53 after a cautious start to the morning's trading following three fatal attacks in Germany in little over two days.
The euro was recently up 0.10% against the dollar at $1.0988.