German confidence up as powerhouse of EU economy continues to expand

German firms are feeling more confident than at any time in the past 16 months, according to the latest survey of the sector.

The Ifo think tank’s business survey index for August outstripped market expectations by rising to 107.5, up from 106.2 in July.

That is Ifo’s highest since April 2012 and signals that the powerhouse of the European economy, led by Angela Merkel, is continuing to expand. GDP is estimated to have grown by 0.7% between April and June, having flatlined in the first quarter.

“The German economy continues surfing on the waves of optimism,” said Carsten Brzeski of ING.

“The gradual filling of order books since the beginning of the year combined with some inventory reductions bodes well for industrial production in the coming months.” The Ifo index has risen for four consecutive months. The German economy’s second-quarter growth was its fastest in more than a year and helped pull the wider eurozone out of its 18-month recession.