German business morale inches up despite coronavirus fears

Confidence among German business leaders nudged slightly higher in February, a closely watched survey said Monday, as bosses appeared to shrug off fears about the novel coronavirus outbreak.

The Ifo institute’s monthly business climate index climbed to 96.1 points in February, up from 96.0 in January.

The reading defied expectations as analysts surveyed by Factset had been bracing for a drop in morale.

“The German economy seems unaffected by developments surrounding the coronavirus,” Ifo chief Clemens Fuest said in a statement.

The virus has killed some 2,600 people and infected over 80,000 since it emerged in China late last year, and fears of a wider outbreak are growing after South Korea, Italy and Iran reported a spike in cases.

Looking in detail at the Ifo survey of some 9,000 firms, manufacturers were the most optimistic for the months ahead.

Germany’s crucial manufacturing sector has been hit hard in recent months but a US-China trade truce and less Brexit uncertainty has eased concerns.

ING Diba bank analyst Carsten Brzeski however said the Ifo reading should be taken with “a pinch of salt”, warning that Germany’s export-oriented economy was uniquely vulnerable to trade upsets caused by the virus.

“Weaker Chinese demand will leave its marks on the economy,” he cautioned.

While it was still too early to gauge the full impact of the virus, Germany is “again at the centre of yet another adverse global event”, he added.