The ifo Institute's survey showed that sentiment among the German companies improved significantly in January, helped by lower inflation and improved economic prospects.
According to the report, the ifo Business Climate Index increased to 90.2, as expected, from 88.6 in December. That was the fourth consecutive month of increase and the highest level since June 2022. However, business confidence remains at a very subdued level by historical standards.
The details of the report showed that the current situation sub-index dropped to 94.1 this month from 94.4 in December. Economists had expected an increase to 95.0. Meanwhile, the gauge measuring companies' expectations for the coming months rose to 86.4 from 83.2 in the previous month. Consensus estimates suggested an increase to 85.0.
Commenting on the data, the Ifo's Economist Klaus Wohlrabe said that the economy started the year with cautious optimism. He added that there probably won't be a recession, but the economy may have shrunk slightly in the 1st quarter.