German business morale steadies, Ifo sees slight Q4 expansion

BERLIN: German business morale held steady in October and Europe’s largest economy should expand slightly in the fourth quarter after contracting earlier in the year, the Ifo economic institute said on Friday.

Ifo said its business climate index was unchanged from the prior month in October at 94.6. That was just above the consensus forecast for 94.5.

“The German economy is stabilising,” Ifo President Clemens Fuest said in a statement.

Europe’s economic powerhouse contracted in the second quarter and many economists expect it to have shrunk in the third quarter. That would put it in recession — usually defined as a period of at least two consecutive quarters of contraction.

But Ifo economist Klaus Wohlrabe told Reuters: “For the fourth quarter, we expect a slight expansion.” Ifo’s index on current conditions fell to 97.8 from 98.6 in September. But its expectations index rose to 91.5 from 90.9.

Germany’s export-reliant economy has been suffering from slower global growth and business uncertainty caused by US President Donald Trump’s ‘America First’ trade policies and Britain’s planned, but delayed, exit from the European Union.

“The uncertainty stemming from Brexit remains high,” Wohlrabe said, but added: “The downward trend in industry has stopped for the time being.” German sportswear group Puma said on Thursday it would take a hit from US tariffs on China in the fourth quarter but still raised its sales forecast.

Chancellor Angela Merkel’s coalition government has resisted calls for a stimulus package to counter the slowdown.

“I am against economic straw fires,” Merkel told a business forum in Berlin on Wednesday.