In March 2025, Germany's Ifo business climate index rose from 85.3 to 86.7 points, signaling improved economic sentiment among businesses.

Approximately 9,000 executives surveyed reported increased satisfaction with the current economic situation, with expectations for the future also showing improvement, according to ifo president Clemens Fuest.

Investor confidence has been bolstered by the prospect of substantial investments, indicating that the economy may have stabilized after two years of recession.

A recently approved multi-billion-euro financial package by the Union and SPD is seen as a critical signal to financial markets, allowing for increased defense spending and establishing a €500 billion infrastructure fund.

Economists from Capital Economics noted that the positive outlook on fiscal stimuli in Germany outweighs concerns about potential U.S. import tariffs, although overall economic activity remains weak.

Potential tariffs imposed by the United States under President Donald Trump could adversely affect Germany's exports and hinder economic growth, creating uncertainty for businesses.

Klaus Wohlrabe, head of ifo surveys, emphasized that while hope is returning, especially in the industrial sector, many businesses remain skeptical about a complete economic recovery.

ING Bank Chief Economist Carsten Brzeski suggested that early signs of recovery are emerging, but cautioned against declaring an end to stagnation.

The improved business expectations are linked to hopes that the financial package from the potential new coalition government will stimulate the economy.

In the manufacturing sector, business sentiment has improved despite a recent decline in order volumes, indicating low capacity pressure.

The Ifo survey results align with recent Purchasing Managers' Index data from S&P Global, which showed a rise from 50.4 to 50.9, indicating moderate growth in March 2025.

Despite the optimism, the Ifo Institute projects only modest growth of 0.2% for 2025, with expectations of a slight acceleration to 0.8% in 2026.