German business morale unexpectedly rose in April, a survey showed today, though expectations were slightly gloomier as companies remain uncertain about how the tariff escalation with the US will play out.
"The German economy is fighting off the recession," the Ifo economic institute's head of surveys, Klaus Wohlrabe, told Reuters.
The Ifo institute said its business climate index rose to 86.9 in April from 86.7 in March, beating forecasts by analysts polled by Reuters for a decrease in the reading to 85.2.
Ifo's expectations index sank, though significantly less than expected, falling to 87.4 from 87.7. Analysts had expected a drop to 85.
The current conditions index rose to 86.4 from 85.7, according to the Munich-based institute's monthly survey of some 9,000 companies.
"Significantly improved business expectations in the construction industry - probably thanks to the infrastructure package - and stable future expectations among service providers are currently almost offsetting the slump in industry as well as in wholesale and retail," said Deka analyst Andreas Scheuerle.
Germany's likely future coalition parties agreed a massive surge in borrowing in March to boost the anaemic economy, but economists have said it will not provide a quick fix this year.
LBBW analyst Elmar Voelker said the survey, while not a reason to celebrate, signalled that the German economy would not slide into a serious recession anytime soon.
"Given the recent escalation in the trade conflict with the US, the figures from Munich are a positive surprise," he said.
The tariffs announced by US President Donald Trump have caused uncertainty globally, and export-oriented Germany, the US's biggest trading partner, will be the biggest European loser in a trade war.
The trade tensions come alongside a slowdown in German industry, with automobile giant Volkswagen and electronics manufacturer Bosch among the companies cutting jobs as high costs and stiff competition from abroad weigh on businesses.
The German government is set to downgrade its economic forecast for 2025 later today, a source told Reuters earlier this week, with Europe's largest economy now seen as stagnating this year.
Germany was the only G7 economy that failed to grow for the last two years, and if the forecast stands, it would mark the third year without growth for the first time in history.
