German Business Confidence Improves In January

(RTTNews) - German business confidence improved slightly in January on more positive assessment about the current situation but the overall low level continues to signal that the economy remains on weak footing.

The ifo business climate index rose more-than-expected to 85.1 in January from 84.7 in the previous month, survey results from the ifo Institute showed on Monday. The reading was seen at 84.9.

Companies were more positive regarding the current situation, while they continued to be pessimistic.

The current situation index registered 86.1, up from 85.1 a month ago and economists' forecast of 85.4. Meanwhile, the expectations index dropped to 84.2 in January from 84.4 in December. Nonetheless, it remained above the expected level of 84.0. In manufacturing, business confidence showed another decline as firms were even more skeptical about the coming months. However, the current situation was assessed as better. Incoming orders continued to fall and capacity utilization remained almost unchanged.

Confidence among service providers improved notably in January. Companies assessed their current situation as considerably better and expectations brightened.

Business sentiment in trade remained unchanged in January. Traders assessed their current situation as more positive. However, expectations were slightly more pessimistic.

In construction, business confidence worsened again in December. This was due to companies' poorer expectations. By contrast, the current situation was assessed as slightly better.

Capital Economics' economist Franziska Palmas said the business sentiment index remained in negative territory in January which supports the view that that Germany will eke out only a small expansion in GDP this year.

The economist noted that ising real incomes and looser monetary policy will give household spending a boost. However, with sentiment still weak, the election unlikely to bring with it much fiscal loosening and struggles in industry set to continue, economic growth will remain subdued, said Palmas.