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German business morale improved more than expected in February, reaching its highest level since August and reinforcing hopes that Europe’s largest economy may finally be turning a corner after a prolonged period of weakness.
The Ifo institute said on Monday that its closely watched business climate index rose to 88.6 in February, up from 87.6 in January. The reading exceeded expectations, with economists polled by Reuters forecasting a smaller increase to 88.4.
“The German economy is showing the first signs of a recovery,” said Ifo President Clemens Fuest, pointing to gradually improving sentiment across much of the private sector.
Companies reported greater satisfaction with current conditions, with the index measuring the present business situation rising to 86.7 in February from 85.7 the previous month. While levels remain subdued by historical standards, economists see the direction of travel as encouraging.
Business expectations also strengthened, with the forward-looking index climbing to 90.5 from 89.6 in January, suggesting growing confidence about the months ahead.
Other indicators are reinforcing the more optimistic picture. Germany’s Composite Purchasing Managers’ Index showed on Friday that business activity growth accelerated to a four-month high in February, supported by improved momentum in services and the first expansion in manufacturing output in more than three and a half years.
The Ifo survey showed improvements across most sectors, with the exception of trade, where companies assessed their current situation as slightly weaker. Still, the broad-based rise in confidence suggests that Germany may be emerging from its recent slowdown, supported by stabilizing demand and a gradual recovery in industrial activity.
