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Fundamental Analysis

German business confidence rises in November - Ifo

24-Nov-2022 10:15:38

The morale of German companies rose by more than anticipated in November, according to a closely-watched survey on Thursday, slightly easing fears over the severity of a possible downturn in Europe's largest economy.

The Ifo Institute's business climate index increased to 86.3 during the month, up from a revised reading of 84.5 in October. Economists had expected the figure to come in at 85.0.

Meanwhile, a gauge of expectations for firms in Germany for the next six months also climbed to 80.0 from 75.9, topping estimates of 77.0.

Ifo Institute president Clemens Fuest said in a statement that recent fears of a steep recession due in part to soaring energy prices stemming from dwindling Russian gas supplies "could prove less severe than many had expected."

"Sentiment in the German economy has improved," Fuest added.

Companies in Germany's key manufacturing sector in particular were "considerably less pessimistic" about the future, as uncertainty about upcoming business conditions fell despite remaining at elevated levels.

The business climate in the country's service industry also jumped sharply.

"The clear rise in Ifo business expectations shows companies realizing that 1) Gas rationing has become unlikely 2) the government's relief package is enormous and 3) input bottlenecks are fading," said Joerg Kraemer, chief economist at Commerzbank. "Recession, yes. Collapse, no."

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