German business morale brightens further in July - Ifo

Credit: REUTERS/RALPH ORLOWSKI

German business morale improved further in July after posting a record increase in June, a survey showed on Monday, suggesting that firms expect Europe's largest economy to recover from the coronavirus shock if a second wave of infections is avoided.

Adds Ifo economist, analyst, background

BERLIN, July 27 (Reuters) - German business morale improved further in July after posting a record increase in June, a survey showed on Monday, suggesting that firms expect Europe's largest economy to recover from the coronavirus shock if a second wave of infections is avoided.

The Ifo institute said its business climate index rose to 90.5 from an upwardly revised 86.3 in June. This was the third increase in a row and came in better than economists' expectations for 89.3.

"The German economy is recovering step by step," Ifo President Clemens Fuest said in a statement, adding that firms were notably more satisfied with the current business situation.

Ifo economist Klaus Wohlrabe said the surprisingly strong Ifo figures suggested that the German economy got off to a good start at the beginning of the third quarter, for which he confirmed a growth forecast of 6.9%.

The German economy is expected to post a double-digit plunge in the three months from April to June, when public life and economic activity came to a near halt due to the pandemic.

The Statistics Office will release preliminary gross domestic product growth data for the second quarter on Thursday.

KfW chief economist Fritzi Koehler-Geib warned it was too early to give the all-clear despite the encouraging Ifo reading and the trend among other sentiment indicators.

"The pre-crisis level will remain a long way off for the foreseeable future, and the continuing fierce rage of the pandemic in large parts of the world is an enormous risk for Germany as an export nation," she added.

(Reporting by Michael Nienaber Editing by Michelle Martin)

((michael.nienaber@thomsonreuters.com; +49 30 2888 5085; Reuters Messaging: michael.nienaber.reuters.com@reuters.net www.twitter.com/REUTERS_DE www.reuters.de))

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