Germany's business confidence improved more than anticipated in August, signaling a rebound in economic activity despite rising energy costs.
The Ifo Institute's business climate index, a key gauge of corporate sentiment, climbed to 88.8 from a revised 86.7 in July, exceeding economist expectations of 87.2. The increase follows a period of persistent weakness in Europe's largest economy, with the August reading marking the highest level since early 2024.
The improvement was broad-based, with expectations component rising to 85.8 from 83.9 and current conditions improving to 92.1 from 90.1. The data suggests that businesses are gradually regaining optimism amid signs of stabilization in industrial output and export demand.
Separate figures showed Germany's gross domestic product expanded by 0.3% in the second quarter, up from the preliminary estimate of 0.2% growth. The revision reflects stronger-than-anticipated private consumption and a rebound in capital expenditure, offsetting continued drag from high energy prices.
Clemens Fuest, president of the Ifo Institute, noted that despite renewed increases in energy costs, the German economy is showing signs of recovery. "The upward trend in business sentiment is encouraging," Fuest said, though he cautioned that risks remain elevated due to geopolitical tensions and structural challenges in energy-intensive industries.
The data comes as European policymakers weigh the timing of monetary policy adjustments, with inflation pressures easing but growth still uneven across the region.
