German business sentiment rebounds as outlook brightens

Business sentiment in Germany has improved for the first time in six months, with confidence around current conditions and future expectations turning brighter.

According to the IFO Institute, the closely followed Business Climate Index rose to 86.5 in October, up from 85.4 in September. The consensus forecast was for a smaller uptick to 85.6.

The current assessment indicator improved to 85.7 from 84.4, while the expectations gauge rose to 87.3 from 86.4.

According to the IFO, the manufacturing downturn – which has provided a substantial drag on wider economic growth in recent quarters – did not continue this month, with "noticeably less pessimistic expectations" from survey respondents.

However, the lack of orders in manufacturing remains a key problem, and capacity utilisation remains well below the long-term average.

In the services sector, confidence around business activity turned positive, with sentiment improving particularly in the logistics, tourism and IT industries.

"Expectations were brighter but marked by skepticism. The German economy stopped the decline for the time being," the IFO said.