The economic outlook in Germany, Europe's largest economy, remains bleak as business sentiment continues to decline. According to a recent survey of companies, September marks the fifth consecutive month of decline.

Ifo Business-Climate Index Declines Slightly

In September, the Ifo business-climate index declined slightly to 85.7, compared to a revised 85.8 in August. Although the reading is still a cause for concern, it was better than the expected decline to 85.0 indicated by economists polled by The Wall Street Journal.

German Economy "Treading Water"

"The German economy is treading water," says Clemens Fuest, president of Ifo. The services sector has experienced its sixth consecutive month of worsening conditions, with sales weaker than previous months. The indicator for current conditions has also seen a decline from 89.0 in August to 88.7.

Manufacturing Sentiment Improves Slightly

On the other hand, there has been a slight improvement in manufacturing sentiment, despite worsening expectations and shrinking order books, as reported by Ifo.

German Economy Expected to Contract

The overall indicator confirms that the German economy remains stagnant and is on track to contract in the third quarter following second-quarter stagnation. Franziska Palmas, a senior economist at Capital Economics, points out that these results suggest that the German economy is in the doldrums.

The Ifo index is based on a survey of approximately 9,000 companies in manufacturing, services, trade, and construction.

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