German business sentiment improves 'considerably' - Ifo

German business sentiment improved "considerably" in December, according to a survey released on Monday by the Ifo Institute.

The business climate index rose to 88.6 from 86.4 in November, coming in ahead of expectations for a reading of 87.4.

The current situation index improved to 94.4 from 93.2, while the expectations gauge increased to 83.2 in December from 80.2 a month earlier.

Ifo president Clemens Fuest said: "German business is entering the holiday season with a sense of hope."

The index for the manufacturing sector rose to -5.6 in December from -11.5 the month before, while the gauge for services improved to -1.2 from -5.3.

The trade index was -20 in December versus -26.9 in November, while the construction gauge printed at -22.2 from -21.5.

Capital Economics said: "The further increase in the Ifo business climate index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But we still think Germany will experience a recession, albeit a shallower one than we initially feared."

Carsten Brzeski, global head of macro at ING, said: "At the end of what has once again been a challenging year for the German economy, hope has returned: hope that the economy might even avoid a winter recession or at least hope that it will only be a mild one.

"Indeed, implemented and announced government fiscal stimulus packages and the lockdown-related backlogs have prevented the economy from falling off a cliff. At the same time, however, the cold winter spell of the last days has shown how quickly filled national gas reserves and gas consumption reductions can disappear again.

"Looking ahead, the fact that the economy has avoided the worst does not automatically mean that the only way is up from here. On the contrary, the downsides still outweigh the upsides: new orders have dropped since February and inventories have started to increase again, a combination that never bodes well for future industrial production."