By Ed Frankl
Business confidence in Germany improved this month as firms shrugged off much of the impact of tariffs on Europe's economy.
The Ifo Institute said Tuesday that its business-climate index rose to 88.4 in June from 87.5 in May, stronger than the 88.0 expected by economists surveyed by The Wall Street Journal.
"Sentiment among companies in Germany has improved...The German economy is slowly building confidence," Ifo President Clemens Fuest said.
German firms' expectations for the next six months brightened in particular, Ifo said, likely a result of cooling trade tensions between the European Union and U.S. after the latter suspended proposed 50% tariffs on goods imports until July.
Planned fiscal loosening by Germany's new government to spend more on defense and infrastructure may also have helped the outlook. The European Central Bank is also expected to cut interest rates further before the end of 2025.
The improvement suggests activity in Germany hasn't yet been meaningfully hit by U.S. tariffs, Franziska Palmas, Capital Economics' senior Europe economist, says in a note.
"But output remains weak and we think a proper recovery will only materialize next year," she cautioned.
Nevertheless, indexes for the four sectors cited by Ifo--manufacturing, services, trade and construction--all improved in June.
The Ifo report came after closely watched business surveys published Monday showed Germany's manufacturing sector rebounded somewhat this month, as new orders rose at their fastest rate in three years.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
06-24-25 0516ET
