Strong German business climate might face downturn over Volkswagen scandal

Today's IFO report showed business sentiment remained strong in Germany, which is most important manufacturing hub in Europe as well as world.

• IFO expectations rose in September to 103.3 from 102.2 in August.
• IFO - current assessment dropped marginally to 114 from 114.8 in August.
• IFO business climate rose to 108.5 in September from 108.4 in August, against market expectation of deterioration to 108.

However, this IFO survey was done before Volkswagen scandal erupted.

German cars are well known in the world and demand high reputation along with whole German manufacturing industry. That reputation shattered with Volkswagen scandal.

German car maker Volkswagen, manipulated its diesel engine such that it could bypass pollution check in the US. Programming chip was used, which would sense checkup and reduce diesel consumption and pollute less to bypass test. Vockswagen have sold millions of diesel cars calling the environment friendly.

This has been a big slap over German reputation for excellence and quality.

However, impact of this scandal would be far-fetched, well beyond car industry. It poses question, whether diesel can be portrayed as environment friendly.

Impact of this scandal will be felt across the world, even Chinese diesel making refineries would feel the heat.