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German business sentiment hits highest in 16 months

German business sentiment hits highest in 16 months
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German business sentiment rose to its highest level in 16 months in August.

That was better than expected from the monthly survey of some 7,000 companies carried out by Germany’s Ifo financial think-tank.

“The German economy moved up a gear,” said Ifo economist Kai Carstensen. “Companies are more satisfied with their current business situation. Their optimism regarding future business developments – although slightly cautious – also grew.”

A pick-up in manufacturing was one of the biggest factors, with Ifo saying a nascent recovery in the eurozone is paying off for German firms as manufacturers said they expect their exports business to improve

This all adds to evidence that Europe’s largest economy is bouncing back from a brief slowdown at the end of last year and the start of this.

However, German retailers and construction firms were less upbeat than last month.

The Ifo’s fourth consecutive rise will be welcome news for Chancellor Angela Merkel. With growth returning, consumers upbeat, the labour market strong and inflation largely under control, the economy should support her bid for a third term in the election on Sept. 22.