German confidence rose to a four-month high in November, suggesting that the economy is set to continue to expand moderately in the fourth quarter.

The business confidence index rose to 95.0 in November from 94.7 in October, survey data from ifo institute showed Monday. The reading was in line with expectations.

The institute said the German is showing resilience. The largest euro area economy is likely to grow 0.2 percent in the fourth quarter, the think tank said.

The latest Ifo index suggests that the economy, and above all, the manufacturing sector, could be in a phase of bottoming out, but a sharp rebound is not yet near, Carsten Brzeski, an ING economist, said.

Ralph Solveen, an economist at Commerzbank, said the survey strengthens the hope that German economy will not go into a deep recession. However, there are no signs of an end to the current phase of stagnation yet.

Companies' assessment of the current situation was slightly better, the survey showed. The current situation index gained marginally to 97.9 from 97.8 a month ago, but below the forecast of 98.0.

At the same time, companies' expectations were less pessimistic than in October. The corresponding index climbed to 92.1 from 91.6 in the previous month.

According to the ifo, the German manufacturing sector is still stuck in recession. Companies viewed their current order backlog very disappointing. They are planning further production cutbacks.

Reflecting poorer current situation assessment, the business climate in manufacturing deteriorated in November.

However, the business climate in services improved as they were more satisfied with their current situation and their expectations departed negative territory.

Business climate in trade strengthened notably in November signaling business will be very good this Christmas.

On the other hand, business climate in construction dropped somewhat as companies were less satisfied with their current situation and expectations were more muted.

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