German Business Sentiment Rises to 15-Month High Despite Weak Economic Outlook

Business confidence in Germany picked up in August, reaching its strongest level in 15 months, according to a survey released on Monday. Despite the unexpected improvement, analysts cautioned that the overall outlook for Europe’s largest economy remained subdued.

The Ifo institute reported that its business climate index rose to 89 in August from 88.6 in July, marking the highest reading since May of last year. Economists surveyed by Reuters had anticipated the index would stay unchanged at 88.6.

“The improvement is not enough to create real hopes for growth,” said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe. “Much is based on expectations for the future, the fulfilment of which is uncertain.”

Ifo explained that the rise in sentiment was driven by stronger expectations among companies, while assessments of the current business situation actually declined slightly. “The recovery of the German economy remains weak,” said Ifo president Clemens Fuest.

Recent figures have already highlighted Germany’s economic struggles, with gross domestic product contracting by 0.3 per cent in the second quarter, further undermining hopes for a stable rebound this year.

Looking ahead, Klaus Wohlrabe, who heads surveys at Ifo, projected only minimal growth in the third quarter, with GDP expected to expand by just 0.1 per cent. He also noted that export prospects had deteriorated since the European Union and the United States reached a framework trade agreement in late July that set a baseline tariff of 15 per cent.

By fLEXI tEAM