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German business morale unexpectedly increased in May, a survey showed Friday, raising hopes Europe’s biggest economy is weathering the Iran war energy shock better than feared.<\/p>\n
The Ifo institute confidence barometer rose to 84.9 points from 84.5 in April, the first time it has gone up since the start of the conflict.<\/p>\n
Analysts had expected a slight decrease.<\/p>\n
“The German economy is stabilising for the time being, although situation remains fragile,” said Clemens Fuest, Ifo’s president.<\/p>\n
The survey had slumped in the months following the start of the US-Israeli war against Iran at the end of February.<\/p>\n
The energy shock triggered by the near total closure of the Strait of Hormuz is a heavy blow for Germany’s power-hungry manufacturers, and dimmed hopes of a strong recovery this year for the long-struggling economy.<\/p>\n
But a massive ramp-up in defence and infrastructure spending may be offsetting the conflict’s impact and helping to bolster business morale, analysts said.<\/p>\n
The latest Ifo survey, based on responses from around 9,000 businesses, showed that companies were more optimistic about both their current situation and future prospects.<\/p>\n
Morale among companies in the manufacturing, services and trade sectors improved. But it fell slightly among construction companies.<\/p>\n
Despite the slight increase, the survey remains at its lowest level since late 2024.<\/p>\n
LBBW bank analyst Jens-Oliver Niklasch said Friday’s survey was a “small positive surprise”.<\/p>\n
Companies had a lot of orders on their books, he noted, adding this would “be a good basis for a recovery if, for example, energy prices were to fall or the general mood were to improve”.<\/p>\n
In other positive news, consumer sentiment improved modestly heading into May, according to another survey.<\/p>\n
The forward-looking indicator, published by pollsters GfK and the Nuremberg Institute for Market Decisions (NIM), rose 3.3 points to minus 29.8 — although it remains at low levels overall.<\/p>\n
Meanwhile the statistics agency said the economy expanded 0.3 percent in the first quarter, confirming previously released data, on the back of strong exports.<\/p>\n
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