* Business morale slightly stronger than expected in Sept
* But business expectations deteriorate
* Ifo economist says economy likely contracted in Q3
* But economy minister says Germany is not in recession (Adds economist comment)
By Paul Carrel and Rene Wagner
BERLIN, Sept 24 (Reuters) - German business morale rose in September for the first time in six months but Europe's largest economy is still likely slipping into recession as the U.S.-China trade conflict and Brexit bite, the Ifo economic institute said on Tuesday.
Ifo's business climate index rose to 94.6 from 94.3 in August, snapping a run of five consecutive falls. September's reading compared with a consensus forecast for 94.4.
"The downturn is taking a breather," Ifo President Clemens Fuest said in a statement. But he added: "In manufacturing, the business climate has only one direction: downward."
Germany's export-reliant economy is suffering from slower global growth and business uncertainty caused by U.S. President Donald Trump's 'America First' trade policies and Britain's planned, but delayed, exit from the European Union.
Ifo's current conditions index rose to 98.5 from 97.4 in August but its expectations index fell to 90.8 from 91.3.
Ifo economist Klaus Wohlrabe said the German economy is likely to shrink again in the third quarter.
That would put it in recession - usually defined as a period of at least two consecutive quarters of contraction - after it shrank by 0.1% in the second quarter.
"This is not the start of a change of trend," Wohlrabe said of Tuesday's firmer overall sentiment reading. "The slowdown is only taking a break," he told Reuters, adding that no signs of improvement were to be seen for German industry.
Economy Minister Peter Altmaier, speaking immediately after the release of the Ifo data, said Germany's growth dynamics have deteriorated but insisted: "We are not in a recession."
Much of the German economy's fortunes are tied up in factors beyond its control: mainly weaker global growth, developments in the U.S.-China trade conflict and the question of whether Britain can achieve an orderly exit from the European Union.
U.S. Treasury Secretary Steven Mnuchin said on Monday that he and U.S. Trade Representative Robert Lighthizer would meet with Chinese Vice Premier Liu He for trade talks in two weeks.
On Brexit, EU negotiator Michel Barnier struck a downbeat note on Tuesday, saying there was no reason to be optimistic that Britain and the bloc will find a solution to the thorny question of the Irish "backstop".