German Business Sentiment Improves In November

Business confidence in Germany improved for the third month in a row in November signaling that the largest euro area economy is stabilizing at a low level, survey results from the Munich-based ifo Institute showed Friday.

The business climate index rose to 87.3 in November from 86.9 in October. The reading was seen at 87.5.

Companies assessed their current business situation as somewhat better and their expectations for the coming months turned less pessimistic.

The current situation indicator rose to 89.4 from 89.2 in the previous month. This was slightly below economists’ forecast of 89.5.

At the same time, the expectations indicator improved to 85.2 from 84.8 a month ago. The score was expected to rise more markedly to 85.7.

Data released earlier in the day showed that the economy shrank 0.1 percent quarterly in the third quarter, offsetting the 0.1 percent rise in the second quarter.

The Bundesbank forecast the German economy to shrink again in the fourth quarter before undergoing a slight increase in economic output in the first quarter of 2024.

Capital Economics’ economist Bradley Saunders said the ifo survey does not change the assessment that GDP will contract again in the fourth quarter and will remain in near-recession conditions in the first half of 2024 too.

ING economist Carsten Brzeski said the ifo survey points to a bottoming out of the German economy, rather than an imminent rebound.

In manufacturing, the business climate rose markedly, the ifo Institute said.

Companies were more satisfied with their current business and their skepticism regarding the months ahead reduced noticeably.

Business confidence among service providers worsened a little.

Service providers assessed their current situation as somewhat less good. Moreover, they adjusted their expectations slightly downward.

Business confidence in trade strengthened notably. The indicators for the current situation as well as for expectations improved.

This was particularly evident in wholesale, while retailers have rather low expectations for their Christmas business.

In construction, the business climate index rose in November. Companies assessed their current business as somewhat better and expectations improved.

Despite this, sentiment in construction remains extraordinarily negative overall, the survey showed.

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