Germany’'s closely monitored ifo Business Environment Index rose to 84.9 points in May from 84.5 in April, according to data released on Friday.
The ifo Business Environment Index, published monthly by the Munich-based ifo Economic Research Institute, is a highly accepted early indicator of economic developments in ’, Germany.
Economists expected a slight weakening of confidence as high energy prices and geopolitical uncertainty continued to exert pressure on the European Union's industrial sector.
The May survey, based on responses from nearly 9,000 companies, showed that companies are more optimistic about both their current situation and future prospects in manufacturing, services and commerce. Confidence in construction companies has declined.
Ifo president Clemens Fuest said in a statement accompanying the poll that the “German economy is stabilizing for now, but the situation remains fragile.” said.
Increasing government spending plans on defense and infrastructure could help offset some of the economic pressure. Germany is looking for ways to revive growth after long-standing industrial weakness and stagnant domestic demand.
Despite modest improvement, overall trade confidence remains weak by historic standards and close to levels seen at the end of 2024.
Concerns over shipping from the Strait of Hormuz, an important route for global oil and gas supplies, have increased energy costs and increased pressure on ’'s manufacturing sector, which is heavily dependent on industrial energy consumption.
German LBBW bank analyst Jens-Oliver Niklasch described the figures as “, a small positive surprise. Niklasch said many firms still have solid order books and that this could support the activity if external pressures start to subside.
Export helps Germany’ avoid new contraction
Germany's Federal Statistical Office also forecasts the economy in the first quarter in line with preliminary forecasts compared to the previous three months. %Confirms it's growing by 0.3. The expansion was mainly supported by strong exports.
The figures reinforced signs that the German economy could stabilize after narrowly recovering from the recession in recent quarters.
But economists continue to warn that geopolitical tensions, unstable energy markets and weak global demand could also hurt growth later in the year.
A recent job survey showed increased resilience among German firms, while analysts said the outlook remains highly sensitive to developments in the Middle East and energy markets.
