By Rachel More
BERLIN (Reuters) -German business morale improved more than expected in October, a survey showed on Friday, offering hope for some respite towards the end of the year in the economy’s grinding battle with industrial woes and weak global demand.
The Ifo institute said its business climate index increased to 86.5 in October from 85.4 the previous month. Analysts polled by Reuters had forecast a reading of 85.6.
“The German economy has been able to halt its decline for the time being,” Ifo president Clemens Fuest said.
The recovery in business sentiment, which ends a four-month streak of declines, sounds a more positive note for the fourth quarter in Europe’s largest economy, which has long been battling to fend off recession.
It also follows a purchasing managers’ survey that showed business activity declining at a slower rate in October.
“The German economy is facing difficult winter months. The external circumstances cannot be changed, but domestic economic stimuli could very well be provided,” said Thomas Gitzel, chief economist at VP Bank, calling for economic reforms.
The German government has vowed to regain momentum with a series of measures to cut bureaucracy, free up labour and attract investment. Chancellor Olaf Scholz has invited industry players to his chancellery next week to discuss a path out of the downturn.
Economic data for the third quarter is due next week and a slew of negative data has put a technical recession – defined as two consecutive quarters of contraction – firmly on the cards following a 0.1% drop in the April-to-June period.
For 2024 as a whole, the government expects output to contract by 0.2%, which would mark a second year of decline and cement Germany’s place as a laggard among its large euro zone peers.
