In October, German business sentiment worsened further as supply bottlenecks clouded the short-term outlook.

The IFO business climate index decreased from 98.9 points to 97.7 in October. This is the indicator's 4th consecutive decline after it peaked at 101.8 in June.

The data fell short of the consensus forecast from economists polled by the Wall Street Journal, who predicted the index would fall to 98.0.

"Sand in the wheels of the German economy is delaying recovery," said IFO Institute President Clemens Fuest regarding supply issues.

Companies were less satisfied with their current business, and they were also more pessimistic about the coming months.

The business expectations component fell from 97.4 to 95.4. The indicator that evaluates companies' current business situation also decreased, falling from 100.4 to 100.1.

The manufacturing business climate index decreased from 20.0 to 17.2, as companies were less content with their current business and expectations also clouded further.

Supply bottlenecks reduced capacity utilisation by 2.1 p.p to 84.7%.

The business climate also worsened in the service sector, which fell from 19.1 to 16.5. Companies were significantly less optimistic about the coming months. However, their assessments of the current business situation improved slightly.

In trade, the index fell from 9.0 to 3.7, as businesses were less satisfied with their current situation, and were more pessimistic about the coming months due to supply bottlenecks.

The construction sector was the only one in which the business climate index improved, increasing from 11.1 to 12.9. Expectations in this sector climbed for the 6th consecutive month.