Germany's business climate unexpectedly improves to highest level in 15 months, but economic outlook remains weak
The business climate in Germany improved in August, reaching its highest level in more than a year. However, the economic outlook remains weak, with slow growth and numerous challenges.
German business sentiment unexpectedly improved in August, reaching its highest level in 15 months, a survey showed. However, analysts warned that the economic outlook remains weak.
The Ifo Institute said its business climate index rose to 89.0 in August from 88.6 in July, the highest level since May last year. Analysts polled by Reuters had forecast a reading of 88.6.
"The improvement is not enough to create real hopes for growth. Many are based on expectations for the future, the realization of which is uncertain," the economists explain.
The increase was driven by improved expectations among companies, while the current situation was assessed slightly more negatively, according to the Ifo Institute. “The recovery of the German economy remains weak,” the sources emphasize.
Germany's economy shrank by 0.3% in the second quarter, further dampening expectations for a sustained recovery this year. The institute predicts a slight rebound in the third quarter, with gross domestic product rising by just 0.1%.
The organization added that export expectations have worsened following the EU-US trade deal in late July, which sets a base tariff of 15%. Higher US tariffs are holding back growth, while interest rate cuts by the European Central Bank and billions spent on infrastructure by the German government are expected to fuel a moderate recovery, said a VP Bank economist. “The slow rise in the Ifo business climate index shows that the German economy is progressing in small steps,” he explained.
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