German Business Sentiment Rises Sixth Consecutive Month

German business confidence rose in June to its highest level in over a year, driven by optimism about government fiscal measures and easing trade tensions with the US. The IFO business climate index increased to 88.4, with the expectations index reaching 90.7, reflecting the strongest outlook since early 2023. Despite ongoing geopolitical uncertainties, including the reinstatement of US tariffs on EU steel, aluminum, and cars by President Donald Trump, firms remain upbeat due to planned increases in public spending, especially on defense and infrastructure. The German government has amended its debt rules to allow higher defense spending and created a €500 billion fund for infrastructure, boosting business sentiment. The positive mood spans various sectors including manufacturing, services, trade, and construction, supported by declining interest rates and a stronger-than-expected economic growth in the first quarter of 2025. Analysts note that businesses are focusing on the potential benefits from fiscal policy rather than the risks posed by trade disputes and geopolitical tensions.