German business sentiment improves in March – Ifo

German business morale rose in March, according to an Ifo survey released on Tuesday, as companies anticipate a recovery after two years of economic contraction in Europe’s largest economy.

The Ifo Institute reported that its business climate index increased to 86.7 in March, up from 85.3 in February, aligning with expectations.
The survey indicated that companies were more satisfied with the current situation, and their expectations improved noticeably.

This comes after Germany’s gross domestic product contracted by 0.2% in the fourth quarter, with projections for 0.2% growth in the first three months of 2025.

Recent data also showed an increase in industry export expectations, as businesses hope that a new government will bring greater stability and increased investments.
Adding to the optimism, Germany’s parliament recently approved a significant spending surge, breaking away from decades of fiscal conservatism in an effort to stimulate economic growth and enhance military spending for a new era of European collective defense.

Economists predict that this fiscal stimulus will help improve sentiment in Germany and partially offset concerns about the potential impact of US tariffs.
However, the economy remains fragile, despite signs that economic activity may no longer be contracting.

Further optimism has been fueled by the fastest rise in business activity in Germany’s private sector in 10 months, with March seeing the first increase in manufacturing production in nearly two years.