Published On: Tue, Aug 25th, 2015

German Economic Sentiment Remains Positive Whilst Government Maintains Growth Forecast

German Output

Germany is forecasting 1.8 percent growth in 2015.

Despite concerns over China’s economy and turmoil in Greece, German companies shrugged off the issues according to a recent survey and government forecasts.

The Ifo institute said on Tuesday that the index of business sentiment in Europe’s largest economy rose unexpectedly to 108.3 points in August from 108 in July. Many analysts expected a slight decrease to 107.6 points. The result of the survey did not yet reflect the latest correction in Chinese and global stock markets.

The news comes as Germany’s government said on Tuesday it will stick to its forecast of 1.8 percent growth in the country this year and next despite turbulence in China.

Jeromin Zettelmeyer said “We are on track,” and “Our forecasts were already cautious but they are realistic, as shown now.” The German economy expanded by 1.6 percent last year.

“Most significant for the pickup in Germany are rising employment and private consumption,” said Zettelmeyer.

Tuesdays data showed that foreign trade was the key driver for 0.4 percent of economic growth in the second quarter whilst domestic demand held back growth..

The upbeat results come after a turbulent few days with many markets tumbling due to worries over slowing economic growth in China. The world’s second-largest economy is a very important market for German companies however worries over a slowdown there were not widely felt in the survey despite exports slowing somewhat.

Carsten Brzeski, Chief Economist at ING-DiBa said “German companies remain unimpressed by the current series of uncertainties and turmoil,” in an email to investors.

“The geographical diversification of German exporters should cushion any further weakening of Chinese demand,” he said. “As long as other major export markets like the U.S., the U.K., Eastern Europe and the eurozone are continuing to grow or at least avoid a new slowdown, German exports should remain solid.”

German companies have also shown confidence during troubles in Greece which agreed last week with eurozone creditors on a third bailout to keep afloat the government’s finances.

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