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German business morale falls slightly in October, beating expectations – Reuters

ByINVESTOR

Oct 25, 2022

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[1/2] The skyline is seen through early morning fog in Frankfurt, Germany, September 22, 2022. REUTERS/Kai Pfaffenbach

BERLIN, Oct 25 (Reuters) – German business morale was nearly unchanged in October, defying forecasts of further decline thanks to an improvement in companies’ expectations, a survey showed on Tuesday, even as analysts say all signs continue to point to a recession ahead.

The Ifo institute said its business climate index inched down to 84.3 from a revised reading of 84.4 in September. Analysts polled by Reuters had expected a drop to 83.3.

The survey’s expectations index ticked up slightly, to 75.6 from 75.3 the previous month, its first rise since May.

“Their expectations improved, but they are still worried about the coming months. The German economy is facing a difficult winter,” said Ifo President Clemens Fuest.

Analysts were similarly gloomy despite the better-than-expected figure, which several attributed to the German government’s announced measures to cap high energy prices.

“Today’s business climate reading does nothing to change the looming recession. In the coming months, further gloom is more likely than an increase,” said LBBW bank’s Jens-Oliver Niklasch.

As Hauck Aufhaeuser Lampe private bank chief economist Alexander Krueger summarized: “Companies remain stuck in depression mode, the energy crisis is stifling economic life.”

The Ifo survey of around 9,000 managers echoes the results of the ZEW economic institute’s survey last week that found German investor sentiment was less pessimistic than expected, also due to price brakes announced for gas and electricity.

The German government expects Europe’s largest economy to slide into recession next year as an energy crisis, rising prices and supply bottlenecks take their toll.

Ahead of the statistics office release on Friday, experts polled by Reuters expect German economic output in the third quarter to decline by 0.2% compared with the previous quarter.

Ifo forecast that Germany will contract by 0.6% in the fourth quarter.

Reporting by Miranda Murray, Rachel More, Reinhard Becker, Rene Wagner and Frank Siebelt
Editing by Kirsti Knolle and Tomasz Janowski

Our Standards: The Thomson Reuters Trust Principles.

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