The Ifo Institute's survey showed that sentiment among the German companies improved in March, recording the second increase in a row and reaching the highest level since June 2023, helped by expectations of potential interest rate cuts by the ECB and a gradual easing of inflationary pressures.
According to the report, the Ifo business climate index rose to 87.8 from 85.5 in February. Economists had expected an increase to 86.0. The details of the report showed that the current situation sub-index increased to 88.1 from 86.9 in February, while economists had expected a decrease to 86.8. Meanwhile, the expectations index, which measures the six-month outlook from the business perspective, rose to 87.5 (the highest reading since May 2023) from 84.1 last month. Consensus estimates suggested an increase to 84.6 points.
"The German economy glimpses light on the horizon," said Ifo president Clemens Fuest.
Earlier this month, the Ifo Institute stated that sentiment among companies and households is poor and uncertainty is high. "Price-adjusted gross domestic product will increase by only 0.2% this year compared to the previous year. Next year, economic output will then increase by 1.5%. This means that the growth forecast for the current year has been significantly lowered (by 0.7%) compared to the ifo Economic Forecast Winter 2023 and slightly raised (by 0.2% points) for 2025," the Ifo Institute said.