Mixed economic signals

Germany's Ifo economic think tank said Thursday that business confidence had beat expectations by rising slightly in September, reflecting the continued robustness of Europe's biggest economy amid concern for a global slowdown.

Ifo's closely-watched business climate index rose to 108.5 points this month from 108.4 points in August. Analysts surveyed by dpa-AFX had expected a slight drop in the index to 107.9 points.

In a statement, Ifo president Hans-Werner Sinn described the German economy as "robust," saying companies had expressed greater optimism about the future of their business. However, they assessed their current business situation "slightly less favorably" than in August, he added.

Ifo calculates its headline index on the basis of about 7,000 company assessments of the current business environment and the outlook for the next six months. The sub-index measuring current business fell to 114.0 points, while the outlook sub-index rose to 103.3 points, the institute said.

VW scandal not factored in

The Ifo survey was conducted before news broke on Friday last week that Germany's flagship carmaker Volkswagen (VW) rigged emissions test of its diesel vehicles in the United States.

The scandal has rocked Germany's business and political establishment and analysts warn the crisis could develop into a bigger threat to Europe's largest economy than the Greek debt crisis.

ING chief economist Carsten Brzeski told the news agency Reuters on Thursday that a VW sales plunge in North America would not only have an impact on the company, but on the German economy as a whole."

In the US, VW sold about 6 percent of its 9.5 million global sales. There, the carmaker is facing penalties of about $18 billion (16 billion euros), and a number of class action lawsuits by deceived customers that could drive the damage costs significantly higher.

However, the broader concern for the German economy is that other car makers such as Daimler and BMW could suffer fallout from the Volkswagen disaster. In 2014, roughly 775,000 people worked in the German automobile sector - nearly two percent of the entire workforce.

Consumer moods clouding

While being polled, German corporate leaders were also unawares of a significant drop in the sentiment of consumers here, whose higher spending shored up growth in recent month.

German market research group GfK warned on Thursday that consumer optimism was "waning somewhat" amid the economic consequences of the European refugee crisis, hitting especially Germany.

GfK's forward-looking headline household confidence index slipped to 9.6 points for October from 9.9 points in September.

Previous falls in consumer sentiment were clearly "no flash in the pan," the research group said in a statement, adding: "If people become nervous about the large number of refugees and start to worry about their jobs that could have a negative effect on consumption."

GfK noted that the barometer nevertheless remained at a very good level, which would continue to make consumer spending a "very important pillar for the economy this year."

uhe/pad (Reuters, dpa, AFP)