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German business morale rose more than expected in March, a major survey showed on Friday, raising hopes that there is “light on the horizon” for Europe’s crisis-hit economy.
The IFO Research Institute’s reliability barometer, which is based on a survey of approximately 9,000 companies, rose from 85.7 points in February to 87.8 points.
Analysts expected a reading of 86, compiled by financial data firm FactSet.
The improvement would offer hope that the eurozone’s traditional growth engine, hit by soaring inflation, rising interest rates and a slowdown in industry, is starting to recover.
IFO Chairman: “Sentiment among German companies has improved markedly” clemens fest Said.
“There is light on the horizon for the German economy.”
Business confidence rose in all sectors surveyed by IFO in March, including manufacturing, services, trade, and construction.
The component of the index that represents future expectations rose significantly, while the component that covers the current state of companies increased more slowly.
ING economist Carsten Brzeski said that despite the improvement, the figure is “still much lower than the levels seen last summer.”
Combined with other recent, more positive data, “the message is clear,” he said.
“The German economy is bottoming out, but a strong recovery is still not in sight.”
He warned of several factors that could hurt growth in the short term, including tensions in the Red Sea and the supply chain crisis caused by a recent series of strikes.
“The outlook remains very bleak,” added Andrew Kenningham of Capital Economics.
“Stagnation in real incomes, the continued drag of high interest rates, weak external demand, and fiscal austerity measures all suggest that the economy is unlikely to grow much, if at all, for the remainder of this year. There is.”
Kenningham and other analysts predict the economy will contract for two consecutive quarters early this year, pushing Germany into a technical recession.
Production fell by 0.3% last year, and although a recovery is expected this year, growth is still expected to be weak.
The German government, central bank and economic institutions have all recently revised down their growth forecasts for 2024, predicting that the recovery will take longer than previously expected.
SR/MFP/LTH
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