German Business Confidence Unexpectedly Drops for Second Month

Marco Green
September 25, 2017

A closely watched survey says German business optimism took a dip in September ahead of federal elections and amid concerns about a stronger euro.

German business confidence deteriorated unexpectedly in September, suggesting that a consumption-led upswing in Europe's largest economy could lose some momentum in coming months.

Deutsche Lufthansa shares rallied almost 2 percent after reports that the airline group is offering to pay 200 million euros to buy its bankrupt smaller opponent Air Berlin.

Stephen Brown, European economist at Capital Economics, says the stronger euro may have weighed on sentiment. As a result, the sub-index for manufacturing "declined markedly", Ifo said, while wholesale business climate "cooled down somewhat". Ifo expert Klaus Wohlrabe said a coalition government made up of Merkel's CDU/CSU party alliance on the one hand, and the environmentalist Greens and the pro-business Free Democrats on the other would be hard to form.

Wohlrabe said that new elections could not be excluded given the difficulty of forming a new government: "So uncertainty can certainly spread". Prices had increased 0.2% on month in July.

The BDI industry association has said it expected the economy to grow by more than 2 percent this year adjusted for calendar effects, which would be the strongest pace in six years.

Other reports by Click Lancashire

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