German business sentiment improves in March, according to Ifo survey findings

26 Mar, 2025

Germany's business morale improved in March, signaling optimism for an economic recovery after two years of contraction. The Ifo Institute’s business climate index rose to 86.7 from 85.3 in February, aligning with analyst forecasts. Companies reported greater satisfaction with the current economic situation and higher expectations for the future.

The German economy, which shrank by 0.2% in the fourth quarter, is projected to grow by 0.2% in Q1. Industry export expectations have risen, and businesses anticipate greater stability with the government’s recent approval of a massive spending surge, which marks a shift from decades of fiscal conservatism.

The fiscal stimulus is boosting sentiment, outweighing concerns over U.S. tariffs. Business activity in Germany’s private sector saw its fastest growth in ten months, with manufacturing output increasing for the first time in nearly two years.

Experts predict a cyclical upswing, though the longevity of the recovery depends on structural reforms. The economy is not yet fully unchained, but optimism fueled by the government’s fiscal measures is growing.

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