German IFO Business Climate Index Pulls Back in September

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Confidence among German businesses eroded slightly in September, a regular survey published Monday found, reflecting uncertainty ahead of a general election on Sunday that has left Chancellor Angela Merkel facing tricky coalition talks.

The Ifo business climate index fell to 115.2 from 115.7 the month before, missing expectations for a reading of 116.0 but remaining above its long-term average of 102.1.

The Business Expectations Index, which measures attitudes toward business prospects over the next six months, inched down to 107.4 this month from 107.8, falling short of forecasts for a reading of 107.9. Although the 2,500 managers surveyed by Ifo downgraded their assessment of the current economic situation, they have upgraded their expectations for the coming half year for the fifth time in a row.

Looking to different sectors surveyed by Ifo, both the manufacturing and wholesale industries reported a dampening of sentiment in September compared with a month earlier.

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"In construction the index broke last month's record", Ifo said.

Higher state spending on roads, bridges and social housing - also to accommodate an influx of more than one million migrants since 2015 - is giving the sector an additional push.

The Ifo index contrasted with last week's Purchasing Managers' Index (PMI) that showed Germany's private sector expanding at the fastest pace in nearly six-and-a-half years in September.

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