German Ifo Business Sentiment Seen Rising for Sixth Month

German business confidence probably rose for a sixth month in October, adding to signs the economy is benefiting from a recovery in the euro area and increasing consumption at home.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 108 from 107.7 in September, according to the median forecast of 39 economists in a Bloomberg News survey. That would be the highest level since April 2012. A measure of expectations will also increase while a gauge of current conditions will remain unchanged, the survey shows. Ifo releases the report at 10 a.m. in Munich today.

German industrial production advanced more than economists predicted in August, unemployment remained near a two-decade low in September and investor sentiment increased to the highest in more than three years in October. At the same time, the Bundesbank said this week that growth probably slowed in the third quarter after a 0.7 percent expansion in the three months through June.

“In Germany, the economy has turned the corner and embarked on a sustained recovery,” said Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt AG in Dusseldorf. “Of course, the level of the second quarter can’t be maintained but private consumption and investment are increasing and putting the economy on an increasingly solid footing.”

Christmas Business

German gross domestic product probably increased 0.4 percent in the third quarter and will rise at the same pace in the fourth, according to Bloomberg’s monthly economic survey published on Oct. 10. The German Federal Statistics Office is due to release preliminary data for the past quarter on Nov. 14.

Olaf Koch, chief executive officer at Metro AG (MEO), Germany’s biggest retailer, said on Oct. 17 he’s “confident” about Christmas business after increased electronics sales in the company’s home market helped nine-month revenue meet analysts’ estimates.

The 17-nation euro area, Germany’s biggest trading partner, emerged from its longest-ever recession in the second quarter, thanks in part to Germany’s economic strength. Since then, manufacturing and services output in the region expanded, according to a survey of purchasing managers, and the Spanish economy, the bloc’s fourth largest, has returned to growth.

Yet, there are still “broad-based weaknesses in the economy” and the risks to the outlook continue “to be on the downside,” European Central Bank President Mario Draghi said this month.

Challenging Position

The Frankfurt-based ECB predicts the currency bloc’s economy will shrink 0.4 percent this year before growing 1 percent in 2014.

Europe overall in the next four years will have quite a challenging position,” Henkel AG Chief Executive Officer Kasper Rorsted said in an interview with Bloomberg Television on Oct. 2. “We don’t expect a lot of growth, if any at all in western Europe” until 2017, he said.

Deutsche Lufthansa AG (LHA) this week predicted operating profit for 2013 that fell short of analysts’ estimates as restructuring costs mount and the strong euro depresses revenue. The single currency has appreciated more than 5 percent since early September.

“Uncertainty continues to be high and that’s why companies have little reason to invest strongly,” said Gerd Hassel, an economist at BHF-Bank AG in Frankfurt. “The German economy is doing alright but I’d expect a setback in the third quarter.”

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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