BERLIN, Oct. 27 (Xinhua) — German business sentiment ticked up in October, resuming its months-long upward trend after a setback in September. However, economists warned that Europe’s largest economy remains at risk of another year of stagnation.
The ifo Business Climate Index rose to 88.4 points from 87.7 in the previous month, the Munich-based ifo Institute reported on Monday. Of the index’s four components, sentiment in manufacturing, services and trade improved, but construction slipped modestly.
Manufacturing companies in particular reported better expectations for the coming months but were less satisfied with their current situation. “The decline in new orders has come to a halt,” ifo said, noting that capacity utilization remains well below its long-term average, highlighting persistent weak demand.
According to this monthly survey of around 9,000 company executives, assessments of current business conditions fell for a third consecutive month, while expectations turned more optimistic. “Companies remain hopeful that the economy will pick up in the coming year,” said ifo President Clemens Fuest.
In an interview with German media on Sunday, Fuest warned that Germany was in “an economic decline” and described the current situation as serious. He urged the federal government to present a comprehensive reform package within the next six months to revitalize growth.
Carsten Brzeski, global head of macro at ING Research, said that despite Monday’s rise in the ifo index, “the risk of yet another year of stagnation is still alive and kicking.”
After a modest rebound early this year, Germany’s economy shrank 0.3 percent in the second quarter.
Analysts expect gross domestic product figures for the third quarter, which are due on Thursday, to show another quarterly contraction instead of a rebound. The country’s central bank, Bundesbank, has also said the economy failed to gain momentum over the summer.
