German IFO Business Index Drops Unexpectedly In October

German business confidence dropped in October, against analysts’ expectations, after rising for five consecutive months, data released on Friday by Munich-based CESifo Group showed.

The Ifo Business Climate index, or BCI, for industry and trade in Germany fell to 107.4 in October, from 107.7 in September and below expectations of a 108.0 reading. The Ifo Expectations index dropped to 103.6 in October, compared to 104.2 in the previous month and below a 104.5 consensus reading. The Ifo Current Assessment index slipped to 111.3 in October, compared to 111.4 in September and an expected 111.6 reading.

“The fall in the German Ifo business sentiment in October provides another timely reminder that the euro-zone recovery remains fragile,” Ben May, European economist at Capital Economics, said in a note.

The business climate indicator in manufacturing and construction dropped, and after last month’s sharp increase, the business climate index in retailing also saw a decline, CESifo said in the report.

“Encouragingly, on past form, the BCI still points to annual GDP growth of around 2%, compared to Q2’s 0.5% gain, suggesting that further strong quarterly gains in GDP are on the cards in the second half of this year. In all, while we expect the German recovery to continue, we see GDP growth picking up from about 0.5% this year to just 1.5% or so in 2014,” May said.