(Bloomberg) -- Germany’s business outlook improved for a third month amid signs that double-digit inflation may be peaking and a deep recession over the winter can be avoided.

A gauge of expectations released Monday by the Ifo institute increased to 83.2 in December from a revised 80.2 the previous month, beating expectations by economists in a Bloomberg survey. An index of current conditions also edged higher.

“Sentiment in the German economy has brightened considerably,” Ifo President Clemens Fuest said in a statement. “German business is entering the holiday season with a sense of hope.”

Germany was among countries reporting slower inflation in November as pressure from surging energy costs receded. Well-filled gas-storage facilities have also lowered the likelihood that Russia’s war in Ukraine will lead to disruptive shortages in the coming months. 

While the Bundesbank still expects output to shrink through the first half of next year, the recession may turn out to be shallower than many had initially feared. Surveys of purchasing managers released Friday showed the downturn easing as price pressures cooled, leading firms to be less pessimistic than last month. 

Uncertainty remains high. Continued cold weather could reignite concerns about energy supplies in Europe’s largest economy, and companies are set to be squeezed by higher borrowing costs as the European Central Bank continues to hike interest rates to stamp out inflation.

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