(Oct 26): Germany’s business outlook unexpectedly brightened for a sixth month in a row, underscoring the economy’s rebound from a prolonged downturn.

An expectations index by the Ifo institute rose to 91.6 in October from 90.4 the previous month. Economists surveyed by Bloomberg had anticipated a small decline to 90. A gauge measuring current conditions surprisingly edged down.

“The economics recovery is continuing,” Ifo president Clemens Fuest said on Monday in a statement. “Companies, however, assessed their current situation as slightly worse.”

Europe’s largest economy is enjoying a surprisingly strong year, despite inflation triggered by the Iran war and heat waves that crippled key waterways. Underpinning the expansion is vast spending on infrastructure, defence and artificial intelligence. The government recently upgraded its growth forecast for 2026 to 1.3%

The going has been bumpy. The Bundesbank estimates that output stagnated in the third quarter, when unseasonably hot weather lowered water levels in the Rhine river, disrupting a vital transport route for the country’s industrial sector.

Rising interest rates could create additional headwinds. European Central Bank officials have signalled that more tightening might be needed to tame price gains, though they’re widely expected to leave the key deposit rate at 2.5% on Thursday.

But Germany’s central bank expects the final three months of the year to record “noticeable” growth, while business surveys from S&P Global last week pointed to a fourth straight month of expansion, despite momentum weakening.  

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