German business sentiment improves more than expected - Ifo

German investor sentiment improved more than expected in December, according to a survey released by the Ifo institute on Wednesday.

The Ifo’s business climate index rose to 96.3 from an upwardly-revised 95.1 in November, beating expectations for a reading of 95.5.

Meanwhile, the economic expectations index ticked up to 93.8 from a revised 92.3, hitting the best level since June and coming in ahead of expectations of 93.0.

The gauge for the manufacturing sector improved to -5.0 in December from -5.8 the month before, while the services index printed at 21.3 versus 17.4 in November. The trade index fell to 0.0 from 0.9 and the construction index declined to 17.9 from 20.3.

Ifo president Clemens Fuest said: "The German economy is heading into the New Year with more confidence."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the rebound has likely been confirmed.

"This is a better headline than we expected, adding further evidence that downside risks to economic growth in Germany are now slowly receding. Across sectors, sentiment improved in manufacturing, wholesale and services, though it dipped in construction. The pickup in the services gauge was particularly strong. Overall, the German economy is not out of the woods yet- the early Q4 hard data have been miserable- but this is the third month in a row that the IFO expectations gauge has climbed, reversing the downtrend for most of the previous 12-to-18 months. This is usually a bullish sign of a turning point.

"The key question is then how strong the upturn will be. At the moment, survey and hard data suggest that the German economy stalled in the second half of 2019, and we expect only a slow pick-up in H1 2020, but a rebound nonetheless."

ING economist Carsten Brzeski said: "Another increase in the Ifo index suggests that the worst for the German economy should be over. However, what will come after the 'worst' still remains unclear."