German recession 'very unlikely' given brighter business sentiment, Ifo head says

The latest figures from Germany's national statistics office showed the country's July-September GDP up by 0.4% on the quarter and by 1.2% on the year. Initial estimates suggest growth of 1.9% for the whole of 2022 and stagnation in the final quarter. But there have been repeated warnings that Germany and other European countries could face a recession amid an energy crisis, a manufacturing slowdown, high inflation and downbeat consumer and business sentiment.

"This was the most important risk for the economy, a scenario where gas supplies would simply be insufficient for the winter and parts of manufacturing would have to be cut off, because [the] priority would be give to households, to heating," Fuest said on CNBC's "Street Signs" program. It comes after Purchasing Mangers Index figures on Tuesday showed a modest return to January growth from euro zone activity in services and manufacturing. The S&P Global euro zone composite PMI was 50.2, up from 49.3 in December. The 50 mark separates expansion from contraction.

"Our expectation would be that the situation will continue to improve slowly but steadily throughout the year," he said.One area of concern for Germany was construction, where Fuest noted sharply higher costs and rising interest rates.

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