German economy shrugs off China worries

  • 27/10/2015
VW (Reuters)
VW (Reuters)

German businesses are confident about the outlook for Europe's biggest economy, despite China's slowdown and the Volkswagen scandal, a top survey shows, as the Bundesbank also insisted economic growth was still on track.

The leading economic think-tank Ifo on Monday said in its closely-watched business confidence survey that concerns about slowing growth in China, the Volkswagen pollution-cheating scam and the massive influx of mostly Syrian refugees in Europe had dented optimism only slightly this month.

Its headline index slipped to 108.2 points in October from 108.5 points in September, Ifo said in a statement, a much shallower drop than analysts had expected.

At the same time, the German central bank or Bundesbank, said in its latest monthly report that the underlying growth trend remains "very robust".

"The upward momentum of overall economic activity in Germany continued in the third quarter," the Bundesbank said.

But it conceded that growth in the period from July to September may not come out "quite as dynamic" as in the preceding two quarters, when it had stood at 0.3 percent and 0.4 percent respectively.

Still, BayernLB economist Stefan Kipar concluded: "We're not going to see a turnaround to the downside just yet."

For its survey, the Ifo institute quizzes businesses about their current business and the outlook for the next six months.

"Companies were slightly less satisfied with their current business situation than in September," said Ifo president Hans-Werner Sinn.

But "optimism with a view to future business developments nevertheless continued to grow," he said.

"The German economy is proving remarkably resilient in view of this autumn's multiple challenges."

Even the discovery of pollution-cheating devices on 11 million Volkswagen cars worldwide "has had no impact on the German automotive industry," Sinn said.

VW is currently embroiled in its biggest-ever scandal after it was exposed with fitting its diesel engines with sophisticated software to skew the results of pollution emissions tests.

The revelations have rocked the auto sector around the world and cast a shadow over the German economy.

But according to Ifo's survey "the climate index for the automotive sector even continued to rise this month".

"Assessments of the current business situation and business expectations both improved. Firms plan to ramp up production. Exports, however, are not expected to provide further stimuli," Ifo chief Sinn added.