German Business Morale Rises Despite Trade Jitters
Thursday 24th April 2025 – 12:04 (BST)
Germany’s IFO Business Climate index showed a modest but notable uptick in April, rising to 86.9 from a revised 86.7 in March, marking its highest level since July and defying analyst expectations of stagnation. The improvement signals cautious optimism among firms, underpinned by Berlin’s expansive fiscal stance aimed at reviving domestic momentum in the face of mounting global headwinds.
The survey, a closely watched gauge of corporate morale, indicated that current business conditions have strengthened, with the corresponding index climbing to 86.4 from 85.7, beating forecasts of 85.5. The improvement has been broadly attributed to stepped-up public investment in infrastructure, defence, and targeted support for industrial sectors, part of a wider attempt to offset the economic drag from transatlantic trade tensions.
Sectoral dynamics showed a mixed picture: sentiment in the services sector remained almost flat, registering only a marginal improvement (-0.8 vs -1.1 in March), while the mood among constructors brightened notably (-21 vs -24.3). Manufacturing, however, saw a dip in sentiment, with its index falling to -18.1 from -16.6, reflecting ongoing weakness in industrial orders and export demand.
Despite these gains, forward-looking indicators painted a more sobering picture. The expectations index slipped slightly to 87.4 from 87.7, though it still outperformed consensus estimates of 85. The decline underscores growing concern among businesses over the global trade landscape, with heightened fears of protectionism and potential tariff escalations – particularly from the US – weighing on corporate outlooks.
The data provided modest support for the euro, which edged higher against the dollar following the release. Market participants interpreted the report as a tentative sign of resilience in the eurozone’s largest economy, alleviating some near-term pressure on the European Central Bank to further ease policy. However, gains were capped by lingering geopolitical uncertainty and doubts over the sustainability of Germany’s fiscal impulse.