Pedestrians pass a Christian Dior SE luxury clothing store in Munich, Germany. (Photographer: Dominik Osswald/Bloomberg)

German Business Sentiment Rose for First Time in Nine Months

(Bloomberg) -- German business confidence rose for the first time in nine months as companies’ concerns about rising trade tensions seem to have bottomed out.

The Ifo institute’s closely watched gauge increased to 103.8 in August from 101.7 in July. The pickup, the first since the index started declining from a record high late last year, was better than economists had forecast. An expectations index also rose.

German Business Sentiment Rose for First Time in Nine Months

Germany’s economy continued its robust expansion in the second quarter, expanding 0.5 percent, and Ifo said it may match that pace in the three months through September. The Bundesbank says it remains on a “sound growth path” after a slowdown at the start of the year, though weakening growth in China, emerging market turmoil and protectionism pose risks to the outlook.

While companies may be postponing some investment amid still-high uncertainty, this month’s survey hints at “strong domestic activity,” according to Ifo President Clemens Fuest. “The second factor is, we have a truce in the trade war with the U.S. The fact that tariffs on cars have at least been postponed and may not come at all is very important.”

The euro rose after the report and traded at $1.1616 at 10:39 a.m. Frankfurt time.

Private-sector activity picked up in August, driven by robust growth in services, and unemployment probably extended its decline as companies added staff to meet demand.

“Given that capacity utilization has increased to the highest level since 2008 and companies have never before seen equipment as such a significant limiting factor to production as now, the German economy’s current biggest problem is that it is bursting at the seams,” said Carsten Brzeski, chief German economist at ING-Diba in Frankfurt. “Despite the recent upswing in investments, the economy clearly needs more investments, and fast.

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