The Ifo Institute's survey showed that sentiment among the German companies improved markedly in March and reached the highest level since July 2024, helped by parliament's approval of plans to increase defense spending and create a large-scale infrastructure fund aimed at strengthening Europe's largest economy.
According to the report, the Ifo business climate index rose to 86.7 from 85.3 in February (revised from 85.2). Economists had expected the index to rise to 87.0 points.
The details of the report showed that the current situation sub-index increased to 85.7 points from 85.0 points in February, while economists predicted a decline to 84.9. Meanwhile, the expectations index, which measures the six-month outlook from the business perspective, increased to 87.7 (the highest value since June 2024) from 85.6 in February (revised from 85.4). Consensus estimates suggested growth to 91.5 points.
Last week, the Ifo Institute lowered its forecast for German economic growth, as a looming large-scale fiscal stimulus package failed to mitigate the impact of global trade tensions and policy uncertainty. The Ifo Institute now expects Germany's GDP, the largest in the EU, to expand by just 0.2% this year – down from the 0.4% growth previously forecast in January.