German business sentiment improves in October - Ifo

BERLIN, Oct 25 (Reuters) - German business morale improved more than expected in October, following five consecutive months of decline, a survey showed on Wednesday, but economists still fear a recession.

The Ifo institute said its business climate index stood at 86.9 versus the 85.9 reading forecast by analysts in a Reuters poll, following a slightly revised reading of 85.8 in September.

Companies were somewhat more satisfied with the current business situation and managers were also less pessimistic about the coming months, the survey showed.

“Germanys economy can see a silver lining ahead,” Ifo president Clemens Fuest said.

However, the low level of the Ifo business climate index continues to suggest a contraction of the German economy in the second half of the year, said Joerg Kraemer, chief economist at Commerzbank.

The German economy is seen at risk of sliding into its second technical recession in a year after shrinking in the last quarter of 2022 and the first quarter of 2023.

Kraemer doesnt expect a strong recovery next year, as the interest rate hikes of the European Central Bank are still having an impact on the economy.

“In addition, companies are unsettled by economic and climate policy, especially since Germanys attractiveness as a business location has eroded over the past 15 years,” Kraemer said.

It is difficult to see a ray of hope, said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank.

“The Middle East conflict is likely to have been a brake on expectations,” Krueger said. “Growth hopes remain buried for the next few months.”

Sentiment among German managers improved in manufacturing, services and construction, while it declined in trade, the survey showed.