Sentiment among German companies strengthened in May for the first time since February due to an improvement in current conditions, indicating that the economy remains on track despite a challenging environment.
Moreover, the GfK survey forecast German optimism to reach its highest level in more than five years. The two survey reports released today boost hopes of firm recovery going forward after the economy thwarted recession in the first quarter due to a rebound in consumer spending.
The business sentiment index rose to 105.7 in May from 104.4 in April, a survey carried out by the Ifo institute among 7,000 executives, showed Friday. The reading was forecast to remain unchanged at 104.4.
Within the overall index, the assessment of current conditions climbed to 110, from a revised 107.3, while it was forecast to stay at 107.2, the originally estimated figure for April. At the same time, the expectations index held steady at 101.6 in May, and matched economists' expectations.
The business sentiment among manufacturers recovered in May. Manufacturers were significantly more satisfied with their current business situation and were slightly more optimistic about outlook.
Although export expectations have weakened somewhat, they still indicate that continued stimulus from abroad is expected, the survey found.
Business climate improved in wholesale and retail trade. In wholesaling, the surveyed companies are significantly more satisfied with their current business situation. Moreover, skepticism regarding business outlook decreased.
In retailing, the satisfaction with the current business situation increased for the fourth time in succession. Expectations for the future course of business have brightened somewhat.
Although the contractors are slightly more satisfied with their current business situation than in the previous month, their optimism has decreased with regard to further business development.
Gross domestic product rose 0.1 percent quarter-on-quarter in the first quarter. Positive contribution came almost entirely from household final consumption.
Bundesbank in its monthly report said economic activity will improve markedly in the second quarter with "catch-up effects" in construction and noticeable increase in industrial orders.
However, Capital Economics Senior Economist Jennifer McKeown expects a modest recovery this year to leave the annual average at around zero.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.