German business morale rose in October, a survey showed on Monday, offering a faint sign of optimism for Europe’s largest economy even as trade tensions and weak global demand continued to weigh on growth.
The Ifo Institute reported that its business climate index increased to 88.4 in October from 87.7 in September, surpassing analysts’ expectations of 88.0, according to a Reuters poll.
“German business has not yet given up hope for an upturn,” said Klaus Wohlrabe, head of the Ifo survey. “Expectations are rising in all sectors — industry, construction, and services. There is a glimmer of hope in industrial orders: the fall in orders seems to have stopped.”
Germany’s economy has struggled to regain momentum this year. It contracted by 0.3% in the second quarter compared to the first, as U.S. demand weakened following months of advance purchasing ahead of President Donald Trump’s new tariffs.
“The trend for Ifo as well as for the purchasing manager index is pointing upwards,” noted Joerg Kraemer, chief economist at Commerzbank. He added that the government’s fiscal boost — equivalent to 1% of GDP — should provide additional support in 2026, though he cautioned that “the lack of reforms may mean that the higher growth is just a flash in the pan.”
Ifo’s survey showed that while companies remained less satisfied with current business conditions, their expectations for the coming months had improved, signaling cautious confidence in a potential recovery.
“The index has not recovered from last month’s mood decline,” said Alexander Kruger, chief economist at Hauck Aufhaeuser Lampe. “U.S. tariffs and intense competition from China mean things will still be rocky.”
The German government, which expects only 0.2% growth this year, has projected a rebound with 1.3% growth in 2026 and 1.4% in 2027, supported by state spending and fiscal stimulus measures.
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