The Ifo Institute's survey showed that sentiment among the German companies improved in April, recording the third increase in a row and reaching the highest level since May 2023. The increase in sentiment was caused by expectations of a further decrease in inflation and a potential easing of the ECB's monetary policy.
According to the report, the Ifo business climate index rose to 89.4 from 87.9 in March (revised from 87.8). Economists had expected an increase to 88.9. The details of the report showed that the current situation sub-index increased to 88.9 from 88.1 in March, while economists had expected growth to 89.0. Meanwhile, the expectations index, which measures the six-month outlook from the business perspective, rose to 89.9 (the highest reading since May 2023) from 87.7 last month (revised from 87.5). Consensus estimates suggested an increase to 88.9 points.
“Sentiment has improved at companies in Germany. Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers," said Ifo president Clemens Fuest.
Bundesbank now estimates that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic. Meanwhile, experts warn that although inflation is expected to ease this year, economic growth is forecast to remain relatively weak. Last week, the International Monetary Fund cut its forecasts for German GDP by 0.3% for both 2024 and 2025, expecting 0.2% growth this year and 1.3% next year.