German business sentiment deteriorated less than expected in July, signaling companies may have withstood the initial shock of Britain’s decision to leave the European Union.
The Munich-based Ifo institute’s business climate index fell to 108.3 from 108.7 in June. The median estimate in a Bloomberg survey of economists was for a decline to 107.5.
The report suggests Europe’s largest economy remains robust for now even as the U.K., the third-largest destination for German exports, reels from the effects of its June 23 referendum. A separate purchasing managers survey last week showed Germany’s manufacturing output reached the highest level since early 2014 in July, buttressed by record-low unemployment and increasing demand.
Ifo’s measure of current economic conditions climbed to 114.7 from a revised 114.6, according to the report. A gauge of expectations deteriorated to 102.2 from 103.1.
European Central Bank President Mario Draghi said last week his institution won’t hesitate to add fresh stimulus if needed, once it has a clearer picture of the economic impact from the British referendum. While he had predicted that Brexit could weaken the euro-area’s growth by as much as 0.5 percentage point over three years, he later said that those numbers should be treated with “with some grain of caution.”
The Bundesbank said in its monthly report last week that the economic impact of Britain’s vote to leave may be limited in the short term, even as the entire fallout is currently difficult to estimate.