German Business Outlook Improves, Feeding Rebound Hopes

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(Bloomberg) -- Germany’s business outlook improved slightly, supporting expectations for Europe’s largest economy to rebound modestly — even as it faces a...

-- Germany’s business outlook improved slightly, supporting expectations for Europe’s largest economy to rebound modestly — even as it faces a possible second recession in just over a year.An expectations index by the Ifo institute rose to 84.7 in October, up from a revised 83.1 the previous month. That beat the median estimate in a Bloomberg survey for an increase to 83.5. A measure of current conditions unexpectedly advanced.

The key manufacturing sector continues to struggle. Chemical giant Lanxess AG announced last week that it will cut 7% of its workforce in Germany due to energy shortages and cratering global demand — adding to previously announced redundancies at BASF SE. Citing cost issues and supply disruption, Volkswagen AG has cut guidance.

More deep-seated challenges, like a rapid aging of Germany’s workforce and the need to diversify trading relationships away from China, point to only feeble expansion in the coming years. Comparisons with the 1990s, when Germany was labeled the “sick man” of Europe, have also emerged.Top officials — including Finance Minister Christian Lindner and Bundesbank President Joachim Nagel — have pushed back against such suggestions, saying German industry can overcome the challenges it’s facing.

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