German business sentiment surprises on the upside

(Sharecast News) - Business sentiment in Germany strengthened in October, a closely-watched survey showed on Wednesday. The latest ifo Business Climate Index came in at 86.9 in October, up from 85.8 a month previously. Respondents' view of the current situation was largely unchanged, edging up to 89.2 from 88.7. But the index for expectations for the months ahead rose to 84.7 from 83.1, the highest since May.

Within individual sectors, the manufacturing confidence index strengthened to -15.9 from -16.2 a month previously, while the services gauge improved notably to -1.5 from -4.9.

Trade fared less well, however, with the index falling to -27.2 from -25.0, while the construction gauge was largely unchanged at -31.1.

Clemens Fuest, president of the ifo Institute, said: "Germany's economy can see a lining ahead.

"In manufacturing, the business climate index rose slightly. This was due to less scepticism in expectations. However, [companies] once again assessed their current situation as worse, and the order situation remains difficult.

"The service sector is considerably more positive. Companies were especially more satisfied with their current business. Their expectations also improved, albeit still marked by misgivings."

Germany is Europe's largest economy and is heavily skewered towards manufacturing.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: "The ifo staged a surprise rebound, in contrast to the decline in the PMI.

"One month does not make a trend, and the survey is still consistent with slowing GDP growth. But the increase is a much welcome sign of resilience amid a sea of otherwise poor soft and hard data in Germany."

Rabobank said the survey results were "overall slightly better than expected. But that doesn't take away from the broader message that things aren't exactly great in the German economy right now".

The ifo Business Climate Index is based on around 9,000 monthly responses from businesses in manufacturing, services, trade and construction.