Amended: German Ifo Business Confidence Near One-Year Low

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German business morale weakened for the fifth consecutive month in September to hit the lowest level in 11 months as companies were less satisfied with their current situation amid the subdued economic activity, survey results from the ifo Institute showed on Monday.

The business climate index fell to 85.7 from 85.8 in the previous month. This was the lowest score since October 2022. Nonetheless, the reading was above economists’ forecast of 85.2.

While companies were less satisfied with their current situation, their pessimism about the coming months dissipated slightly, ifo Institute President Clemens Fuest said.

“The German economy is treading water,” Fuest added.

After the previous four consecutive sharp declines, the trend in the Ifo index continues to point clearly downward, Commerzbank economist Jorg Kramer said.

The massive increase in key interest rates in the euro zone and many other countries also points to a recession, and a further burden is the high level of uncertainty among companies about the government’s economic policy, Kramer added.

In the latest monthly report, the Bundesbank said the economy will contract slightly in the third quarter as private consumption is unlikely to contribute positively.

With household real incomes set to flat line over the coming quarters, and industry and construction firms facing a sharp drop-off in new orders, the economy is likely to contract further in the fourth quarter, Capital Economics’ economist Franziska Palmas said.

At 88.7, the ifo business situation indicator decreased from 89.0 but remained above the expected level of 88.0.

By contrast, the business expectations index rose to 82.9 in September, in line with expectations, from 82.7 a month ago.

Confidence among manufacturers improved moderately. Companies were somewhat more satisfied with their current business. Meanwhile, their expectations weakened slightly and remained pessimistic.

In the service sector, sentiment declined for the sixth consecutive month, reflecting a notable deterioration in the current business situation. On the other hand, expectations improved slightly but are still marked by skepticism.

Confidence in trade improved in September. This was due to less pessimistic expectations but businesses were less satisfied with their current situation.

In construction, the business climate index fell to its lowest since January 2009. Companies continued to assess their current situation as worse. Moreover, the outlook for the months ahead remained thoroughly pessimistic.

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