German Ifo Business Confidence Strengthens

(RTTNews) - German business sentiment improved in June as firms perceived the current business environment as less uncertain following the signing of the US-Iran peace deal, survey results from the ifo Institute showed Wednesday.

The business climate index rose to a three-month high of 85.6 in June, as expected, from 85.0 in the previous month.

Companies assessed their current business situation more positively. Expectations became somewhat less skeptical.

The current situation index rose unexpectedly to 87.0 in June, marking the highest since July 2024. The reading was forecast to fall to 86.0 from 86.1 in May.

At the same time, the expectations index climbed to 84.1 from 83.9 in the prior month. The score was below forecast of 85.0.

"German companies are hoping for geopolitical tensions to ease," ifo Institute President Clemens Fuest said.

ING economist Carsten Brzeski said talks between Iran and the US on reopening the Strait of Hormuz are probably the real driver behind the renewed business optimism.

The economist said the hard data suggests that there is a high risk that the German economy slipped into contraction in the second quarter. Meanwhile, soft data such as ifo survey, points to a return of optimism.

Business confidence among manufacturers rose due to noticeably improved expectations, though assessments of the current business situation were revised slightly downward.

In the service sector, the business climate improved in June. Service providers were noticeably more satisfied with current business, while expectations remained almost unchanged. Companies continued to be skeptical.

In trade, business confidence strengthened again. Companies were more satisfied with the current situation. Expectations also increased markedly. However, the road to recovery is still long, ifo said.

The business climate indicator in the construction sector also improved. This was due to less pessimistic expectations. Assessments of the current business situation remained unchanged.