German business sentiment improved unexpectedly in September according to a closely-watch report by Munich-based Ifo Institute. The Ifo business climate index rose to 108.5 from a revised 108.4 in August and was above expectations by analysts surveyed by Reuters for a reading of 108.0.
Business sentiment rose in August following the resolution of the Greek debt crisis and appears to have weathered market volatility in recent weeks on concerns about weak economic data from China and uncertainty about the timing of US interest rate increases. German business sentiment could nonetheless take a hit from the emissions-testing scandal that rocked car manufacturer Volkswagen last week that might undermine trust in the German manufacturing sector.
A purchasing managers’ index (PMI) of manufacturing and services for the eurozone slipped to 53.9 in September from 54.3 in August, according to a report published by Markit Economics. But the headline numbers masked some divergent stories in the underlying details.
Manufacturing in France has returned to growth, with preliminary PMI for September at 50.4, well above economists’ expectations. A number above 50 to expansion.
German manufacturing PMI at 52.5 was also largely in line with expectations. Here, the underlying performance was strong: firms noted the positive economic environment and improved demand from both domestic and foreign markets, with a second monthly rise in new export orders.
Norway’s central bank last week unexpectedly lowered its key policy rate by 25 basis points as a fall in oil prices dampened economic growth. The bank suggested that further reductions may be in the pipeline. The executive board of Norges Bank decided to cut its key rate to a record low of 0.75 per cent from one per cent. The bank was widely expected to leave its rates unchanged.
This was the second reduction in interest rates so far this year. The bank last reduced the rate in June, when it cut its policy rate by 25 basis points. Norway expanded at a slower pace in the second quarter largely due to the weakness in industries supplying the petroleum industry. The economy grew only 0.2 per cent from the first quarter.
This report was compiled by Bank of Valletta plc for general information purposes only.