German Business Morale Rises for Third Month as Ifo Index Beats Forecasts

German business morale improved more than expected in July, with the Ifo Institute's business climate index rising to 86.6 from a slightly upwardly revised 85.7 in June, surpassing the 86.0 forecast by analysts polled by Reuters. It was the index's highest reading since February and the third consecutive monthly increase, pointing to a gradual, if fragile, stabilisation in Europe's largest economy. The improvement was driven by a marked rise in expectations for the months ahead, which climbed to 86.7 from 84.3, while companies' assessment of current conditions edged down slightly to 86.5 from 87.0, suggesting the recovery remains uneven. Sentiment improved across sectors, with manufacturing, services, trade and construction all becoming less pessimistic amid recovering demand and easing supply constraints. Ifo President Clemens Fuest said that despite the uncertain situation in the Persian Gulf, the German economy was showing less pessimism, though he cautioned that the run of increases was not yet a signal of a strong growth rebound. Economists said the data at least demonstrated a degree of resilience against the backdrop of the ongoing conflict and geopolitical uncertainty.