Construction lifts German sentiment to 9-month highs but trade clouds loom #NewsGerman

Germany’s corporate morale edged higher for the fourth straight month in April, reaching its highest point since last summer, yet business leaders remain wary of storm clouds gathering over global trade and geopolitical risks.

The Ifo Business Climate Index, a key barometer of sentiment among German firms, edged up to 86.9 in April from 86.7 in March, beating expectations and marking the strongest reading since July 2024. While the marginal gain suggests economic resilience, underlying data reveals a more nuanced picture, with rising optimism about current conditions offset by waning expectations for the months ahead.

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The improvement was largely supported by robust public investment efforts, particularly in construction, as Berlin accelerates fiscal stimulus to buffer the economy from external headwinds.

These include fresh tariff threats from the United States, which have reintroduced an element of unpredictability into the global trade order.

The index measuring current conditions rose to 86.4 in April from 85.7 the month prior, comfortably beating the consensus forecast of 85.5.

Yet, the expectations index, which gauges outlooks over the next six months, dipped to 87.4 from 87.7—still above market consensus of 85, but indicative of growing unease.

“Companies were more positive about their current situation. However, expectations were gloomier. Uncertainty among the companies has increased. The German economy is preparing for turbulence,” Clemens Fuest, President of the Ifo Institute, said.

Despite the broad uptick, confidence remains fragmented across sectors. In manufacturing—traditionally the engine of German economic strength—the mood soured again following a brief recovery in March.

This was mainly due to “noticeably more pessimistic expectations,” the Ifo Institute said, as concerns about export demand and order backlogs resurfaced.

By contrast, the construction sector was a standout performer in April, reaching its highest sentiment level since May 2023. This was driven by “significantly improved expectations” as firms began to anticipate the rollout of new infrastructure projects tied to Berlin’s fiscal push.

The services sector also showed mild improvement, with companies reporting higher satisfaction about their current situation, especially in hospitality.

Yet, outlooks remained “slightly skeptical,” particularly among transport and logistics firms, which saw a drop in sentiment amid fuel cost concerns and shipping disruptions.