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German Business Sentiment At 7-Month High

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German business confidence improved to a seven-month high in September as the economy showed signs of stabilization despite rising number of coronavirus infection, survey results from the ifo Institute showed Thursday.

The business confidence index rose to 93.4 in September from 92.5 in August. This was the highest reading since February but was slightly below economists' forecast of 93.8.

The very small increase in the business confidence for September is further evidence that the recovery has run out of steam, Andrew Kenningham, an economist at Capital Economics, said.

Germany's export-oriented manufacturing sector is still expanding but this is likely to be offset by renewed weakness in the services sector, the economist noted.

Companies assessed their current situation as better than in the previous month and they expect situation to recover further, the ifo survey showed.

The current conditions index climbed to 89.2 from 87.9 in the previous month. The expected reading was 89.5.

Similarly, the expectations index rose to 97.7 in September from 97.2 a month ago. Economists had forecast the reading to climb to 98.0.

In manufacturing, business confidence logged a noticeable increase as significantly fewer companies assessed their current business situation as difficult and more industrial companies expected that their business situation to improve further in the near future.

In the service sector, business confidence weakened after rising four times in a row. This was due to less optimistic expectations.

In trade, the business climate brightened considerably. Companies were considerably more satisfied with their current business situation, and many of them assume it will improve further over the months ahead.

Business confidence in construction also improved in September. The indicator for the current situation climbed to its highest value since last March. Although the outlook remains pessimistic, it is somewhat less so than in August.

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