German business confidence improved for the first time in five months in October but remained at a low level suggesting weaker economic activity, survey results from the ifo Institute showed Friday.
The business climate index climbed to 86.5 in October from 85.4 in the previous month. The score was forecast to rise to 85.6.
This was the first rise in five months and remained above economists forecast of 85.6.
Companies were more satisfied with their current situation and their expectations were brighter but marked by skepticism.
The current situation index unexpectedly advanced to 85.7 in October from 84.4 a month ago. The reading was seen at 84.1. The expectations index posted 87.3, up from 86.4 in September and forecast of 86.8.
The German economy stopped the decline for the time being, Ifo Institute President Clemens Fuest said.
The rise in the business climate index still left it deep in recessionary territory, Capital Economics economist Franziska Palmas said. With growth in the rest of the euro area also weak, the European Central Bank is set to cut its deposit rate by 50 basis points in December, the economist added.
The downward trend in the manufacturing sector halted due to noticeably less pessimistic expectations by the companies. However, they assessed the current business situation as considerably worse.
In the service sector, the business climate index returned to positive territory. Services companies were noticeably more satisfied with the current situation and their expectations rose slightly.
In trade, business confidence rose somewhat. Although expectations improved slightly, firms were less satisfied with the current business situation.
By contrast, business confidence in trade worsened due to more pessimistic expectations by the companies. However, traders assessed the current business situation as somewhat better.