Thursday, 11 February 2016

German Companies More Optimistic Than Ever, Says DIHK Survey

In World Economy News 11/02/2016

Business sentiment among German companies reached a record high, according to a survey published Wednesday, reflecting optimism about the domestic economy even as exports are expected to slow sharply.
The German Chambers of Commerce, or DIHK, said its survey of more than 27,000 local companies showed they were very upbeat about their current business situation because strong private consumption, low unemployment and higher wages gave a boost to domestic trade and services sectors.
“Companies assess their current business situation as good as never before,” the DIHK report said. “Overall, low oil prices, the weak exchange rate and favorable financing terms offer currently unusually good conditions.”
Martin Wansleben, DIHK managing director, said they were “surprised by the optimism” companies displayed but risks ahead stand in the way of a dynamic overall economic upswing.
The group maintained its growth outlook for 2016 of just 1.3% that it already gave in the autumn.
“This is a solid performance, although not quite as dynamic as the 1.7% in the year before,” said Mr. Wansleben. “The multiple international and national risks stand in the way of stronger growth. We can also not expect that oil prices and the euro will fall as much as in the past year.”
The group’s outlook is more pessimistic than the government’s forecast of 1.7% growth for 2016.
Of those polled between the beginning of December last year and mid-January this year, 46% described their business situation as good, up from 44% previously, while 46% said they were satisfied, down from 47% in the spring. Only 8% said they weren’t doing well, compared with 9% previously.
The survey also showed that the companies’ business outlook has brightened, with 24% of them seeing improvements ahead, up from the 23% in the previous survey in the autumn.
About 13% of those surveyed said they thought Germany’s economic situation will worsen, down from 14% in the previous survey. The percentage expecting the situation to remain the same remained at 63%.
The findings contrast with the latest survey of German business sentiment conducted by the Ifo Institute, which reported a sharp drop in business expectations based on a survey of 7,000 companies due to weak a dynamic in developing economies.
DIHK said sentiment among German exporters improved somewhat from last autumn’s weakness due to a better economic outlook for Europe and the U.S. as well as weak oil prices and the euro’s low exchange rate.
The number of respondents predicting that their export activities would rise increased to 32% from 30%, while 56% said the situation would remain unchanged. The proportion of those expecting it to worsen fell to 12% compared with 14% previously.
The DIHK forecasts that German exports growth will slow to 3.0% from 5.4% in 2015 due to global uncertainties and the fading boost from the euro’s weaker exchange rate. This is much below what the DIHK calls a “normal” annual export growth level of 6%.
But the DIHK lobby group, which represents some three million businesses, also warned that the unusually favorable conditions of low oil prices, interest rates and the weak euro are up against high political uncertainties, such as global conflicts and the migrant crisis.
Mr. Wansleben stressed that the low oil price had been initially positive, but the impact on the stability of oil producing countries has become a concern.

Source: Dow Jones