German Business Confidence Brightens In October – Ifo

Business sentiment in Germany brightened slightly in October but the modest improvement after a few months of easing failed to calm the fears of recession, a survey by the ifo institute showed on Wednesday.

The ifo business climate index rose to 86.9 in October from 85.8 in the previous month, survey results from the Munich-based think tank said. The reading was well above economists’ forecast of 85.9.

German companies were somewhat more satisfied with their current business and managers were less pessimistic about coming months.

The current situation index climbed to 89.2 from 88.7 a month ago. The expected level was 88.5.

Likewise, the expectations index advanced to 84.7 from 83.1 in September. The reading was forecast to edge up to 83.3.

Germany’s economy can see a silver lining ahead, said ifo President Clemens Fuest.

However, recent survey results as well as economic indicators provided a bleak outlook.

In the monthly report, released Monday, Bundesbank said the largest euro area economy probably shrunk somewhat in the third quarter. The bank cited the weak foreign demand for industrial products as one of the factors that weighed on activity.

Earlier this month, the International Monetary Fund projected the German economy to shrink 0.5 percent this year owing to the weakness in interest-rate-sensitive sectors and slower trading-partner demand.

The ifo survey showed that business climate improved slightly in the manufacturing sector. The increase reflected the reduced skepticism in companies’ expectations but they assessed their current situation as worse.

Business confidence in services was considerably more positive. Companies were more satisfied with their current business and their expectations improved.

In trade, business confidence deteriorated in October with downward revisions to current assessment and more pessimistic view regarding the coming months.

By contrast, sentiment among contractors showed a marginal improvement. Companies assessed their current situation as marginally worse and the outlook for the coming months was somewhat better but remained pessimistic.

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