Business sentiment surges in Germany's electrical industry

Business sentiment in Germany's electrical industry has surged to its highest level in years, the Munich-based ifo Institute said on Thursday.

The sector's business climate index rose by 8.3 points to 24.8 in September, with companies particularly upbeat about their current situation.

The indicator measuring current business conditions jumped by 14 points to 29, while expectations for the coming months also improved, though less sharply.

"The electrical equipment industry is increasingly becoming the economic locomotive of German industry," said ifo expert Klaus Wohlrabe. 

"While many manufacturing sectors are still struggling with weak demand, business here is already going considerably better."

Demand was "exceptionally strong" in September, according to ifo, with companies reporting a significant increase in new orders.

But the strong order situation is also creating challenges.

Around 40% of companies reported shortages of intermediate products, while a growing number of firms said they planned to raise their selling prices.

"Demand is not the problem at the moment. Supply of intermediate goods, on the other hand, could become the bottleneck," Wohlrabe said.