German business morale rises more than expected in December

German business morale rose more than expected in December as Europe’s largest economy approached the end of the year with an improved outlook despite the energy crisis and high inflation, a survey said on Monday.

The Ifo institute said its business climate index rose to 88.6 from a revised reading of 86.4 in November.

A Reuters poll of analysts had pointed to a December reading of 87.4.

The indicator measuring how companies assess their current situation also posted a bigger-than-expected rise in December, to 94.4 from a revised 93.2 in November, marking a U-turn after six consecutive decreases. Analysts polled by Reuters had expected a reading of 93.5.

German businesses are entering the holiday season with a sense of hope, said Ifo President Clemens Fuest.

Signs have mounted in recent weeks that the German economy could stave off the worst of an economic downturn triggered by a plunge in energy supply from Russia after the Ukraine invasion.

Inflation slowed slightly to 11.3 per cent in November from a high of 11.6 per cent the month prior as energy prices eased.

Meanwhile, Ifo was among the economic institutes to revise up their forecasts for 2023, now predicting a milder 0.3 per cent contraction next year.