By Maria Martinez
BERLIN (Reuters) – German business morale improved slightly more than expected in May, a survey showed on Thursday, with companies less gloomy about their future prospects.
The Ifo institute said its business climate index rose to 87.5 in May from 86.9 in April.
Analysts polled by Reuters had forecast a rise in the reading to 87.4.
“The German economy is slowly regaining its footing,” Ifo president Clemens Fuest said.
The business climate even improved in the export-orientated manufacturing sector, Commerzbank’s chief economist Joerg Kraemer said.
The tariffs announced by U.S. President Donald Trump are expected to deal a major blow to Germany’s export-focussed economy.
“The fifth consecutive increase in the Ifo business climate shows that German companies defied Trump’s tariff shock in May as well,” Kraemer said.
The improvement in business morale was mainly due to a rise in the future expectations index to 88.9 in May from 87.4 in April.
“After the back-and-forth on US tariffs, German businesses seem to be focusing on the bright side of what could happen under the new German government, rather than fearing the downsides from ongoing uncertainty and trade tensions,” said Carsten Brzeski, global head of macro at ING.
However, the current conditions index fell to 86.1 from 86.4 in the previous month.
A separate Purchasing Managers’ Index survey on Thursday showed business activity in Germany fell in May, marking the first contraction this year, as a sharp downturn in the service sector overshadowed some improvement in manufacturing.
Germany, the only G7 nation that has recorded no economic growth for two consecutive years, faces another potential contraction in 2025 due to U.S. tariffs.
On Wednesday, a government panel revised its growth forecast, now predicting the economy to stagnate this year.
(Reporting by Rachel More, Kirsti Knolle and Maria Martinez, Editing by Madeline Chambers and Toby Chopra)
