Germany’s Ifo Index Hits Highest Level Since 2018

German business confidence hit its highest level since the end of 2018 in June. as the gradual relaxation of pandemic restrictions supported both current activity and expectations for the future.

Ifo, the Munich-based think-tank,. said its closely-watched business climate index rose to 104.0, from 102.9 in May. Analysts had expected a more modest increase to 103.6. Ifo economists said that conditions in the retail sector were improving at their fastest rate since reunification back in 1990 – a reflection of the lifting of restrictions on many German retailers as the incidence of Covid-19 in Europe’s largest economy receded.

Germany’s economy is typically the engine of growth for the broader Eurozone economy, which is showing signs of an increasingly broad and robust recovery as vaccination rates improve.. The IHS Markit composite PMI for the Eurozone, a real-time proxy for economic growth, hit a record high in June, according to preliminary estimates released on Wednesday.

“The reopening of the economy on the back of a still accelerating vaccination rollout has clearly boosted optimism and seems to be outweighing any concerns stemming from supply chain disruptions,” ING analyst Carsten Brzeski said in a note to clients. “The potential spillovers from US fiscal stimulus, the implementation of the European Recovery Fund in the second half of the year, a rebound in the construction sector and the fact that the manufacturing sector still has not reached pre-crisis levels, all signal that the only way is up for the German economy.”

Earlier Thursday, the Eurozone’s second-largest economy France had reported a similar rise in its INSEE business confidence index to 107.. That rise was, however, less sharp than forecast.