German business confidence increases

German business confidence increased for a fifth month in September amid signs the economic recovery is continuing in the euro area, the nation’s biggest trading partner.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 107.7 from a revised 107.6 in August.

Europe’s largest economy is benefiting from unemployment near a two-decade low and the end of the euro area’s longest- ever recession.

Angela Merkel is poised for a third term as German chancellor after her Christian Democrats took the largest share of the vote in September 22 elections on the strength of her economic record.

She’s now in coalition talks as her traditional allies, the Free Democrats, were ousted from parliament.

"We are in growth territory, but not in runaway growth territory," said Christian Schulz, senior economist at Berenberg Bank in London.

“The debate in Germany is shifting to the center-left; we’re going to see more of a focus on fairness, perhaps higher taxes, a bit higher spending. In the short term a government investing more is good for growth.”

A measure of the current situation unexpectedly dropped to 111.4 in September from 112 the prior month.

A gauge of expectations climbed to 104.2 from 103.3. The euro fell after the report. The currency was little changed at $1.3494 at 10.08 am Frankfurt time, after earlier rising as high as $1.3519.

German investment in plant and machinery increased for the first time since 2011 in the second quarter.

Unemployment was at 6.8 per cent in August.

Daimler, the world's third-largest maker of luxury vehicles, said this month that it's having trouble filling orders as August sales at an all-time high put premium-car manufacturers on course for record full-year deliveries.

Porsche, the Volkswagen unit that builds the 911 sports car, said it will reach a target of selling more than 200,000 vehicles a year in 2015 or 2016, about three years earlier than initially planned.

Investments in expanding and modernizing factories around its hometown in Stuttgart, Germany, will exceed €1 billion by 2018, Matthias Mueller, the head of the Porsche brand, said.

While the economy is showing signs of growth, the pace is uneven, according to the Bundesbank.

German factory orders, industrial production and exports all declined in July, and a preliminary gauge of manufacturing for September unexpectedly dropped.

Bloomberg