German business sentiment improves in October on brighter outlook

Business sentiment in Germany improved in October, driven by more optimistic company expectations, the Munich-based ifo Institute said on Monday.

The ifo Business Climate Index rose to 90.2 points in October from 89.9 points in September, according to the institute's monthly survey of approximately 9,000 businesses.

While expectations climbed to 91.6 points from 90.4 points a month earlier, companies assessed their current business situation as slightly worse, with that subindex edging down to 88.8 points from 89.5 points.

"The economic recovery is continuing," said Clemens Fuest, president of the ifo Institute.

In the manufacturing sector, the index rose significantly to a seasonally adjusted balance of 1.2 points from minus 2.7 points in September.

Manufacturing companies rated both their current situation and expectations as substantially better, with both indicators returning to positive territory for the first time in more than three years.

Companies plan to expand production following an increase in incoming orders, the institute said.

In the service sector, the business climate suffered a setback, falling to minus 1.2 points in October from 0.7 points in September.

While service firms were less satisfied with their current performance, their expectations grew more positive, with IT service providers performing particularly well.

In the trade sector, the indicator remained unchanged at minus 17.2 points, as slightly improved expectations offset a more negative view of the current situation.

The wholesale sector outperformed retail, Fuest noted.

The construction sector index rose to minus 15.5 points from minus 17.0 points in September, as companies reported noticeably higher satisfaction with their current business situation alongside a slight improvement in expectations.