Germany Business morale sees surprise boost in February

The Ifo institute's headline index climbed to 111 points, the same level it reached in December.

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German business confidence unexpectedly bounced back in February, a key survey showed Wednesday, even as political uncertainty continues to cloud the prospects for Europe's biggest economy.

The Ifo institute's headline index climbed to 111 points, the same level it reached in December, after slipping to 109.9 points in January.

"After making a cautious start to the year, the German economy is back on track," Ifo president Clemens Fuest said in a statement.

Last month's dip was largely blamed on fears that US President Donald Trump's protectionist leanings and Britain's upcoming divorce talks with the European Union would hurt German exporters.

The optimism in February caught observers by surprise as analysts surveyed by Factset had predicted business morale would fall further in a year fraught with political risk.

Ifo's headline figure is based on a survey of some 7,000 businesses who are asked about the current climate and their expectations for the next six months.

The latest reading by the Munich-based pollster showed that companies' assessment of their current business situation had reached the highest level since 2011.

But managers were more cautious about the months ahead, particularly in the retail and construction sectors.

"The Ifo index rebounded somewhat in February, suggesting that German businesses have digested initial concerns about the possible negative economic implications of the new US president," said analyst Carsten Brzeski of ING Diba bank.

But he warned of challenges ahead for the German economy.

"With almost 10 percent of all German exports going to the US and another five percent going to the UK, it is hard to see how exports could become a strong growth driver in 2017," he said.

"The German economy will continue to be highly dependent on domestic demand," he added.

An investor confidence survey by Germany's ZEW institute registered a sharp fall earlier this month, with investors fretting over Trump, Brexit and a series of hard-to-predict European elections in 2017.

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