FRANKFURT –– Business confidence in Europe’s largest economy has returned to its upward trajectory after September’s hiccup thanks largely to Berlin’s unprecedented spending plans.
Germany’s Ifo economics institute said Wednesday that its latest survey of domestic companies produced a rise in the headline business climate index to 88.4 points, which outpaced the market estimate of 88.0 and the September reading of 87.7.
Prior to September’s decline, the headline rate had risen every month in 2025 except for a sideways slide in February.
This month’s expectations component for the coming six months jumped to its highest mark since the February 2022 survey, the last taken before the Russian invasion of Ukraine. The outlook improved to 91.6 points versus the forecast of 90.0 and September’s upwardly revised result of 89.8.
The current conditions measure of the index dropped for a second consecutive month, falling to 85.3 points, which compared to the estimate of 86.0 and 85.7 in September.
“Companies remain hopeful that the economy will pick up in the coming year,” Ifo said. It noted that manufacturing expectations showed improvement, with the business climate also rising in services and the trades sector. Construction managers were less optimistic, Ifo noted.
Poll results follow stronger PMIs
Purchasing managers in Germany had already expressed more confidence ahead of Monday’s Ifo report. S&P Global said Friday that its composite reading for October showed a rise to 53.8 points – a 28-month high – from 52.0 in August, an improvement that surprised many economists.
The manufacturing reading added a tenth to 49.6, bringing it to closer to growth territory beyond the 50-point mark. Services surged to a 29-month high of 54.4 versus 51.5 last month.
“Germany’s private sector recorded its strongest growth for almost two-and-a-half years at the start of the fourth quarter,” S&P Global said. “Firms reported higher backlogs of work for the first time since July 2022.”
The light at the end of the tunnel might be tank headlamps
Berlin is poised to plow up to a trillion euros or more into its military, domestic infrastructure, and climate protection in the coming years, spending widely expected to turbocharge growth in the world’s fourth-largest economy.
The government’s spending spree has forced public and private sector analysts to raise their expectations for GDP expansion. Goldman Sachs, for example, projected growth of 1.4% in 2026 and 1.8% in 2027, rates above Berlin’s own upwardly adjusted estimates of 1.3% and 1.4% respectively.
On Monday, Politico reported initial plans showing Berlin ready to spend more than EUR 375 bn on military purchases.
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- Expectations best since Russian attack on Ukraine
- PMIs improve
- Berlin spending plans fuel optimism
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
27 October 2025 | 09:50 GMT
FRANKFURT –– Business confidence in Europe’s largest economy has returned to its upward trajectory after September’s hiccup thanks largely to Berlin’s unprecedented spending plans.
Germany’s Ifo economics institute said Wednesday that its latest survey of domestic companies produced a rise in the headline business climate index to 88.4 points, which outpaced the market estimate of 88.0 and the September reading of 87.7.
Prior to September’s decline, the headline rate had risen every month in 2025 except for a sideways slide in February.
This month’s expectations component for the coming six months jumped to its highest mark since the February 2022 survey, the last taken before the Russian invasion of Ukraine. The outlook improved to 91.6 points versus the forecast of 90.0 and September’s upwardly revised result of 89.8.
The current conditions measure of the index dropped for a second consecutive month, falling to 85.3 points, which compared to the estimate of 86.0 and 85.7 in September.
“Companies remain hopeful that the economy will pick up in the coming year,” Ifo said. It noted that manufacturing expectations showed improvement, with the business climate also rising in services and the trades sector. Construction managers were less optimistic, Ifo noted.
Poll results follow stronger PMIs
Purchasing managers in Germany had already expressed more confidence ahead of Monday’s Ifo report. S&P Global said Friday that its composite reading for October showed a rise to 53.8 points – a 28-month high – from 52.0 in August, an improvement that surprised many economists.
The manufacturing reading added a tenth to 49.6, bringing it to closer to growth territory beyond the 50-point mark. Services surged to a 29-month high of 54.4 versus 51.5 last month.
“Germany’s private sector recorded its strongest growth for almost two-and-a-half years at the start of the fourth quarter,” S&P Global said. “Firms reported higher backlogs of work for the first time since July 2022.”
The light at the end of the tunnel might be tank headlamps
Berlin is poised to plow up to a trillion euros or more into its military, domestic infrastructure, and climate protection in the coming years, spending widely expected to turbocharge growth in the world’s fourth-largest economy.
The government’s spending spree has forced public and private sector analysts to raise their expectations for GDP expansion. Goldman Sachs, for example, projected growth of 1.4% in 2026 and 1.8% in 2027, rates above Berlin’s own upwardly adjusted estimates of 1.3% and 1.4% respectively.
On Monday, Politico reported initial plans showing Berlin ready to spend more than EUR 375 bn on military purchases.
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