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German business confidence improves in November - Ifo

By Michele Maatouk

Date: Monday 25 Nov 2019

LONDON (ShareCast) - (Sharecast News) - German business confidence improved a little in November, according to a widely-followed survey released on Monday.
The Ifo business climate index ticked up to 95.0 from 94.7 in October, in line with consensus expectations.

Meanwhile, the current assessment index printed at 97.9 in November from 97.8 the month before, also in line with expectations.

The expectations index edged up to 92.1 from 91.6, coming in below forecasts of 92.5.

The sub-index for manufacturing fell to -5.9 from -5.3, while the service sector index ticked up to 17.3 from 16.7. The trade sub-index was 0.9 versus -3.3 in October and the construction index dipped to 20.4 from 21.0.

Ifo Institute president Clement Fuest said: "The German economy is showing resilience. The Ifo Institute is expecting GDP growth of 0.2% in the fourth quarter.

"Manufacturing, however, is still stuck in recession. The index fell back in November following a rise in October. This was the result of a noticeably poorer assessment of the current situation. In contrast, expectations brightened somewhat. Companies still find their current order backlog very disappointing. They are planning further production cutbacks."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the survey was "bang on market expectations for a tepid rebound, though the increase is nowhere near as solid as the jump observed in the headline investor sentiment indices earlier in the month".

"A rebound, but the overall message is still one of acute recession risk," he said.

Capital Economics said November's Ifo business climate index suggests that the third quarter's small increase in German GDP was not the beginning of a recovery. "We think that the economy will contract in the coming quarters," said economist Jack Allen-Reynolds.

"The sectoral breakdown shows that the business climate in construction was fairly strong, which implies that construction investment will remain healthy. But the country's much larger industrial sector remained in the doldrums. The manufacturing component edged down, and is still consistent with annual declines in industrial output of over 5%. Meanwhile, although the services index edged up, as it has been on a steep downward trend for the past year, it still looks weak and suggests that the economy's problems are not just confined to manufacturing and the auto sector."