Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
The IFO business climate was slightly better than consensus expectations in September as a modest decline in the assessment of the current economic situation (down to 114.0 from 114.8) was offset by an increase in business expectations (up from 102.2 to 103.3). This echoes the picture painted in the flash PMI released yesterday for the same period and supports the view that German growth should resist in Q3, despite deteriorating global growth.
The net balance for manufacturing fell back from 11.1 to 10.1. For the coming months, manufacturing firms still plan to expand production but at a slower pace than anticipated earlier, due to a slight weakening in foreign orders, in line with the bleaker global economic outlook and possibly the appreciation of the euro on a trade-weighted basis in August. While wholesale firms reported a marginal improvement from 13.2 to 13.7, retail trade recorded a sharp increase in the net balance (up from 10.8 to 14.7; highest since May 2011) in September, suggesting that domestic demand regained traction over the last few months. Construction turned positive as the net balance improved from -2.7 to +0.2.
The IFO business climate balance for the service sector, which is reported separately, declined marginally from 30.7 (August) to 30.2 (September). Nevertheless, the index remains close to its record high levels (see figure 2 below) and the assessment on the current situation hit an all-time high, suggesting that activity in the service sector gained further traction during the summer.
"All in all, the IFO survey points to a business environment in the industrial sector this summer that is slightly weaker than at the beginning of the year but not too far off its long-term average. Meanwhile, sentiment in the service sector remains very strong in both the IFO and PMI surveys, suggesting that total GDP should continue to expand at the same pace in the second half of this year, supporting our 1.5% growth forecast for the year as a whole", says Barclays.
