German business confidence unexpectedly improves in March - Ifo
German business confidence unexpectedly improved in March, according to a widely-followed survey released on Monday.
The Ifo business climate index rose to 99.6 this month from a revised 98.7 in February, beating expectations for a reading of 98.5.
Meanwhile, the current assessment index increased to 103.8 from 103.6, topping expectations for a reading of 102.0
The expectations index improved to 95.6 from 94.0 in February, coming in in line with forecasts.
The sub-index for manufacturing fell to 6.6 from 9.1, while the gauge for the service sector rose to 26.0 from 21.3. The trade sub-index increased to 8.2 in March from 4.9 the month before, while the construction index pushed up to 20.3 from 18.0.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "This is a big relief in the wake of the horrible manufacturing PMI on Friday."
"Overall, the IFO continues to signal a further slowdown in GDP growth in Q1, but the headlines confirm the story that manufacturing is in the grips of a recession, while the rest of the economy is stabilising, or even improving slightly, towards the end of Q1."
Data out on Friday showed that German manufacturing activity contracted for the third month in a row in March. IHS Markit's flash composite purchasing managers' index for the manufacturing sector declined to 44.7 from 47.6 the month before, missing expectations for a reading of 48.0 and marking the lowest level in six-and-a-half years.
Andrew Kenningham, chief Europe economist at Capital Economics, said that although the Ifo headline is a relief, it does not suggest that the German economy is out of the woods.
"For a start, the manufacturing component of the survey actually fell (from 9.1 to 6.6) which implies that the recession in that sector may still be getting worse. And the business expectations index published by CES Ifo today is still consistent on past form with manufacturing output contracting by around 2% year-over-year."