Germany’s business sentiment improved more than anticipated in August, signaling tentative economic recovery despite rising energy costs.
The Ifo Business Climate Index, a leading indicator of German economic activity compiled by the Munich-based Ifo Institute, increased to 88.8 in August from a downwardly revised 86.7 in July. The reading surpassed the 87.2 forecast by economists polled by Reuters.
The index’s assessment of current business conditions and expectations for the next six months both contributed to the gain. Ifo President Clemens Fuest noted that the economy is recovering despite renewed upward pressure on energy prices.
Separate data released on Tuesday showed Germany’s gross domestic product expanded by 0.3% in the second quarter of 2026 compared with the previous three months. The figure exceeded the preliminary estimate of 0.2% published last month, reflecting modest growth momentum.
Europe’s largest economy has faced headwinds from elevated energy costs and weak industrial demand, though recent indicators suggest stabilization. The Ifo survey, based on responses from around 9,000 businesses, remains below pre-pandemic levels but indicates a gradual improvement in sentiment.
