 The Ifo survey said the manufacturing climate was stable |
German businesses are happy with the current economic climate, but less confident about the coming six months, a survey has indicated. Research institute Ifo's September business climate index fell for a third month, to 104.9 points from 105 in August, but remains at a high level.
Looking ahead, the Ifo's expectations index fell to 98.9 from 101.4.
Analysts said companies were worried that next year's 3% VAT increase could hit economic growth in 2007.
However, analysts said the optimism amongst firms over current conditions would give more ammunition to the European Central Bank's (ECB) plans raise eurozone interest rates in a bid to cool any inflationary pressures.
"These numbers should help reinforce the ECB's view that the German recovery is holding up well in the face of next year's 3% VAT hike," said David Brown from Bear Stearns International.
"The ECB should stay on track for a rate hike in October, but it is still an open debate whether it will be by a quarter point tightening or whether the ECB will escalate the move to a half point hike."
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