German business confidence rises for sixth month despite global risks

German business confidence improved for the sixth consecutive month in October, according to the ifo Business Climate Index released on Monday. The index rose to 90.2 points from 89.9 in September, indicating continued economic resilience. The Munich-based Institute for Economic Research publishes the index as a monthly early indicator of German economic developments.

Manufacturing leads recovery

The manufacturing sector saw a significant rise, with companies reporting substantial improvements in both current situation and expectations. Both indicators returned to positive territory for the first time in more than three years. Incoming orders increased, and companies plan to expand production.

In contrast, service sector business confidence weakened, as companies were less satisfied with current performance. However, expectations improved, with IT service providers performing particularly well. The trade index remained unchanged, with wholesale faring better than retail. Construction saw a rise, with improved satisfaction and slightly better future expectations.

Carsten Brzeski, head of global macro at ING, noted: “German economic resilience continues as the Ifo index has increased for the sixth consecutive month.” He warned of clear risks, including war in the Middle East, potential escalation after the US mid-term elections, elevated oil prices, and higher gas costs. Low water levels on key transport routes could disrupt supply chains. Brzeski added: “The more the economy defies short-term risks, the higher the chances of a surprise growth story are.” Economists caution that longer-term growth depends on addressing structural challenges such as bureaucracy, high energy costs, and weak competitiveness.