German Business Optimism Surges to Record High in October -- Update

By Nina Adam Features Dow Jones Newswires

German business sentiment surged to a record high in October, as companies raised their outlook for the months ahead, according to the Ifo Institute's monthly survey.

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The think tank said Wednesday that its business climate index increased to 116.7 points from 115.3 points in September. Economists polled by The Wall Street Journal had forecast a reading of 115.1 points.

"Germany's economy is powering ahead," said Ifo president Clemens Fuest, adding that "companies are very optimistic about the months ahead."

The Ifo survey of about 7,000 companies shows that businesses in Europe's largest economy were also more upbeat about their current situation.

Write to Nina Adam at nina.adam@wsj.com

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FRANKFURT--German business sentiment surged to a record high in October led by booming optimism in the engineering sector, a sign that rising corporate investments in the eurozone are increasingly fueling growth in region's largest economy.

The Ifo Institute said Wednesday that its business climate index increased to 116.7 points from 115.3 points in September. Economists were anticipating a small decline.

"Germany's economy is powering ahead," said Ifo president Clemens Fuest.

A pickup in global demand prompted the German government earlier in October to raise its economic growth projection for 2017 to 2.0% from an earlier estimate of 1.5% growth.

Economists say that the Ifo index's unexpected gain signals strong growth in the months ahead, underpinned by a recovery in corporate investments.

"Companies [in Germany] in the first half of the year expanded their investments much more sharply than last year, and survey data suggests that companies will maintain this quicker investment pace," said Joerg Kraemer, chief economist at Commerzbank.

Illustrating the trend, sentiment in Germany's engineering sector leapt almost 14 points to 41.4 points, according to Klaus Wohlrabe, the Ifo economist responsible for the monthly survey.

"There has been a noticeable pickup in orders, which points to strengthening investments," Mr. Wohlrabe said.

German industrial companies also lifted their export outlook, as the ascent in the euro has come to a halt and amid rising eurozone demand for engineering goods.

The pickup in German business sentiment comes as Chancellor Angela Merkel faces tough talks on forming Germany's first three-party ruling majority in parliament--a process that could stretch into next year.

Companies, however, seem to be ignoring the wrangling in Berlin, for now at least.

"It's a bullish signal coming from Germany's corporate landscape," said Andreas Rees, chief German economist at UniCredit.

Write to Nina Adam at nina.adam@wsj.com

(END) Dow Jones Newswires

October 25, 2017 08:01 ET (12:01 GMT)