FRANKFURT: German business sentiment improved slightly in October, a survey showed yesterday, but analysts warned the Israel-Hamas conflict posed new risks as Europe’s top economy struggles to emerge from a downturn.
The Ifo institute’s closely watched confidence barometer, based on a survey of 9,000 companies, rose to 86.9 points from 85.8 in September, the first increase in six months.
Analysts surveyed by financial data company FactSet had expected a smaller rise to 85.9.
“Sentiment in the German economy has improved,” said Ifo president Clemens Fuest, adding there was a “silver lining ahead”.
Companies were less pessimistic than in September about the outlook for the months to come and more satisfied with their current business situation, the survey found.
There were improvements in the manufacturing sector, the service sector, and construction. But when it came to trade, the confidence index fell.
The increase in the Ifo “confirms the impression that the cyclical low point has finally been passed”, said Fritzi Koehler-Geib, chief economist at public lender KfW.
She noted in particular that wages were rising again, which could boost private consumption, a key pillar of the economy.
However she warned: “Besides the immeasurable human suffering… the violence that has flared up in the Middle East means a new risk to the economy.”
The possibility that the Israel-Hamas conflict, which started earlier this month, could spiral into a broader Middle East war has already caused jitters in stock markets and pushed up oil prices.
And despite signs of slight improvement, “the bigger picture remains that the German economy is struggling”, said Franziska Palmas from Capital Economics.
After being buffeted by surging inflation and an energy crisis, Germany fell into recession around the turn of the year and then stagnated in the second quarter.
The German government earlier this month downgraded its forecasts for this year, predicting the economy will shrink 0.4 per cent in 2023.
The International Monetary Fund has forecast that Europe’s traditional growth engine will be the worst performing major economy this year, shrinking by 0.5 per cent. – AFP
