After five declines, the ifo business climate index for October has now risen again. German companies are assessing the prospects better again. However, the situation in many sectors remains tense.
Hopes for improvement in the German economy have increased. This is shown by the current ifo business climate index. It has risen again this month after a long dry spell.
In their initial statements, economists were positively surprised by the business expectations of German companies. Around 9,000 companies respond to questions from the Ifo Institute every month for the business climate index. You will be asked to assess your current business situation and indicate your expectations for the next six months.
“Silver lining on the horizon”
The mood in the German economy then improved in October. The business climate index rose from 85.8 points in September to 86.9 points in October. The experts had only expected a slight increase to 86.0 points. “The German economy sees a silver lining on the horizon,” said Ifo President Clemens Fuest. According to a survey by Ifo, companies were somewhat more satisfied with their current business. Managers were also less pessimistic about the coming months.
However, the assessments of company managers vary for individual economic sectors. In the manufacturing sector, for example, expectations increased in October. However, the current situation is rated worse. According to the Ifo Institute, the order situation in industry is still assessed as difficult.
Service providers more optimistic, construction remains difficult
According to the survey results, the business climate in the service sector has improved significantly, where ongoing business also ensures satisfaction among companies.
In trading, companies revised their assessments of the current situation downwards. Retailers were also more pessimistic about the coming months – especially in wholesale.
Companies in the construction industry also rated their current business situation slightly worse. The outlook for the coming months improved slightly – but remains pessimistic, according to the Ifo.
Experts are optimistic
In their initial statements on the current ifo index, the experts remain cautiously optimistic. “Everything comes to an end, including stagnation,” says Andreas Scheuerle, chief economist at Deka Bank. The companies are counting on a better future “when consumers’ purchasing power returns and the monetary policy braking effects lose their power.”
According to Thomas Gitzel, chief economist at VP Bank, “the most important German economic barometer is currently neither fish nor meat.” This also fits in well with economic development at the moment, “the German economy has been between meager growth and recession for around two years.”
Technical recession possible
According to expert estimates, the German economy will not go beyond stagnation in the second half of 2023. The Bundesbank and many economists assume that the gross domestic product (GDP) fell in the past summer quarter. This means that Germany is in danger of slipping into a technical recession again. The economy is shrinking in two consecutive quarters compared to the previous year. Most experts do not expect noticeable growth until next year.