How is Germany's economy doing? Business Climate Index hits 8-month high
J.P. Morgan Wealth Management
In March, the Ifo Business Climate Index for Germany rose by 1.4 points, to its highest level since July 2024. This survey measures business sentiment regarding Germany’s current and future conditions over the next six months. The increase signals improved satisfaction and optimism among businesses about the current economic situation. This is a welcome sign for Germany, Europe’s largest economy, following two years of economic contraction.
The improvement in business morale follows the historic fiscal spending package that parliament passed earlier this month. The package includes a 500-billion euro infrastructure fund and changes to the country’s debt brake rules to allow for increased defense spending, potentially addressing years of underinvestment in these sectors for Germany. According to Germany’s economic institute DIW, the spending package could boost Germany’s economic output in the coming years. This aligns with our 2025 Outlook (PDF), which suggests that global security spending has room to grow, and governments are likely to deliver higher levels of capital investment into their national security.
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With U.S. equities experiencing heightened volatility, and the S&P 500 down year-to-date, developments in Europe highlight how a globally diversified mix of equities could help portfolios navigate an ever-changing economic landscape.
Germany’s business sentiment reaches eight-month high
All market and economic data as of 03/25/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.
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