The Ifo institute's confidence index, a key indicator for
Europe's biggest economy, edged up to 106.8 points this month from 106.7 in
August.
September's rise was the fourth in a row and takes the
index to its highest level since June 2007.
The rise was also unexpected - the consensus in the
markets was for a modest decline.
"Firms are again more satisfied with their business
situation," Ifo said. "For the near future they continue to be
optimistic, although not quite as much as in August. The business high continues."
A subindex measuring companies' view of their current situation rose to 109.7
points from 108.2. However, the index that measures their outlook for the next
six months slipped to 103.9 from 105.2.
The main impetus behind the September rise in confidence
was the wider economy - in the April-June quarter, the German economy grew by a
massive quarterly rate of 2.2 percent. That was thanks in particular to booming
exports.
The pace of growth is expected to moderate, though, amid
signs that the global recovery from recession is faltering.
"Of course, second quarter growth was unique and
exceptional and a slowdown is inevitable," said Carsten Brzeski, an
economist at ING in Brussels.
"However, with richly filled order books, increasing
investment and production plans and a strong labor market, prospects for the
German economy look still promising," he said, adding that the Ifo reading
"defies any double-dip concerns for the German economy." One sign
that strains in the global recovery are having an impact on Germany was a
slight drop in Ifo's measure of the manufacturing climate. The decline was the
first in over a year.
"The manufacturing index edged down for the first
time in 18 months, suggesting that the effects of the global slowdown are
beginning to be felt," said Jennifer McKeown, an economist at Capital
Economics. "Exports will almost certainly slow further, particularly if
the euro fails to reverse its recent appreciation." The survey did show
improvements in the construction and retail sectors, which should help cushion
the blow from waning exports.
Meanwhile, German steelworkers wrapped up three days of
strikes over pay on Friday, with minimal impact on production ahead of wage
negotiations resuming next week.
Industrial union IG Metall said the warning strikes
affected 67 plants in western Germany, where workers have downed tools for up
to a half a shift since Wednesday.
"Practically everyone who was on shift took part.
Now the ball lies in the court of the employers. They know our demands,"
North Rhine-Westphalia IG Metall leader Oliver Burkhard said in a statement.
The union is pushing for an inflation-busting 6 percent
wage hike for some 85,000 steelworkers in western regions of the country, in a
deal they want to last for 12 months.
Companies that would be affected by any wage increase
include ThyssenKrupp, Salzgitter and ArcelorMittal, which were all hit by the
limited strikes this past week.
Analysts said the strikes would have to develop into a
larger scale industrial conflict for them to cost companies significantly or
have a major impact on production, noting that wage negotiations usually end in
compromise.
"It's not a big deal - the effect of warning strikes
has been minimal," said Marc Gabriel, an analyst at Bankhaus Lampe.
Germany's surging economic recovery has emboldened unions
to push for a substantial pay rise in this year's wage negotiations, with the
steel sector leading the charge.
German workers largely held back on demands for pay rises
in negotiations over the past year in an effort to protect jobs during the
country's sharpest post-war recession.
But that is changing now that Europe's largest economy
has pulled out of last year's freefall. Surging exports and higher consumer
spending boosted growth to 2.2 percent in the second quarter, its highest rate
since Germany reunified in 1990.
Germany's steel industry has profited from strong
industrial activity and a catch-up in the construction sector after a harsh
winter, riding a wave of global recovery that has also boosted euro zone
growth.
With German unemployment falling to 7.6 percent in July,
a level not bettered since April 1992, workers in several sectors will have
added incentive to fight for more pay in this year's planned wage negotiations.
Employers from the steel industry said they were taking
the impact of the warning strikes into account, and hoped to make progress in
the coming round of talks to be held next Wednesday, after two earlier rounds
failed.
"Production was affected somewhat, that can't be
disputed, but we don't have data from the producers just yet," said
Bernhard Strippelmann, managing director from the steel industry employers
association.
"I assume we will attempt to seek further clarity
from the union in the next round over their demands and that we will be ready
to make an offer," he added.
