Good news for economy keeps coming

German business confidence rose for a fourth month in a row in August, data showed on Tuesday, exceeding expectations as companies in Europe's top economy continued to be buoyant.

Good news for economy keeps coming
Photo: DPA

The Ifo economic institute’s closely-watched business climate index rose to 107.5 points this month from 106.2 in July, in a move likely to provide a further boost to Chancellor Angela Merkel a month before general elections.

Analysts polled by Dow Jones Newswires had predicted an increase, albeit slightly lower, to 107 points.

“Companies are more satisfied with their current business situation. Their optimism regarding future business developments — although slightly cautious – also grew,” the think tank’s economist Kai Carstensen said in a statement. “The German economy moved up a gear.”

Ifo calculates its headline index on the basis of companies’ assessments of their current business and the outlook for the next six months.

With the battered eurozone now climbing out of recession, Germany’s manufacturing confidence rose significantly, reaching its highest level since April 2012, the Ifo indicator showed.

“Assessments of the current business situation were considerably better than last month. Business expectations also continued to brighten,” Carstensen said. “Firms expect stronger impulses from export business.”


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Inflation rose in Germany in December: report

Inflation in Europe's largest economy Germany clambered higher in December, official data showed Friday, but remained short of the European Central Bank's target for the 19-nation eurozone.

Inflation rose in Germany in December: report
Prices in Germany are rising, but not as fast as they should be. Photo: Jens Büttner / zb / dpa
Price growth hit 1.5 percent year-on-year last month, statistics authority Destatis said, some 0.4 percentage points higher than in November.
And it reached the same level when measured using the Harmonised Index of Consumer Prices (HICP) yardstick preferred by the ECB.
But while German price growth was headed in the right direction, it was still well short of the ECB's just-below-two-percent goal. Over the full year 2019, inflation averaged just 1.4 percent.
“There is little sign of sustained growing price pressure that could prompt the ECB to rethink its ultra-expansive monetary policy,” said economist Uwe Burkert of LBBW bank.
Here's a graph put together by the German newswire DPA, showing how the inflation rate in Germany has fluctuated between 2008 and 2019. 
The ECB has set interest rates at historic lows, granted hundreds of billions of euros in cheap loans to banks, and bought more than 2.6 trillion euros ($2.9 trillion) of bonds in efforts to keep credit flowing to the economy, stoking growth and inflation.
But it has fallen short of its eurozone-wide price growth target for years, predicting last month it would inch up to just 1.6 percent by 2022.
Economists have pointed to both uncertainty over political events, like trade wars and Brexit, and long-term developments like ageing populations as possible reasons for sluggish growth and inflation.
Under new chief Christine Lagarde, the ECB plans to launch a wide-ranging “strategic review” this year, its first since 2003, that could adjust its tools or even reexamine the inflation target itself.
In the meantime, she has urged countries — like Germany — with sound government finances to lift spending in hopes of juicing the economy.