Adds analysis, quotes from economists
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.
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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.
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(END) Dow Jones Newswires
October 25, 2017 08:01 ET (12:01 GMT)