German business morale posted its biggest rise in almost a year in February, data showed Monday, boosting hopes that Europe’s top economy could be emerging from the worst of its slump.
The Ifo institute confidence barometer was up one point at 88.6, slightly higher than expected in a poll of analysts by financial data firm FactSet.
The rise was the largest since March 2025, when then opposition leader and now Chancellor Friedrich Merz had cheered business by promising to spend hundreds of billions on Germany’s infrastructure and military.
“The figures underpin the turnaround in the industrial sector,” LBBW bank economist Jens-Oliver Niklasch said. “Alongside orders and production, leading indicators are also gradually gaining ground.”
A series of brighter data releases on industrial orders and production have boosted hopes that German industry — hit by fierce Chinese competition as well as muted European growth and US tariffs — could be over the worst.
But defence spending has driven those numbers up and economists have warned that the government’s debt-fuelled bonanza will have a limited effect in the long-run if it ends up financing day-to-day spending, fuelling fears that the German economy could be going through a short-term boost.
“This recovery is purely cyclical in nature,” Niklasch said. “The tailwinds stem from fiscal policy as well as monetary easing”, he added, warning of “structural problems” still facing the German economy.
US President Donald Trump meanwhile announced a new global tariff of 15 Percent on Saturday after the Supreme Court struck down previously imposed duties, plunging German exporters into fresh uncertainty.
“These decisions have created new major uncertainty for transatlantic trade,” the head of the BDI industry group Peter Leibinger said Monday.
“Companies on both sides of the Atlantic now need certain and reliable conditions for trade,” he added.
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