German business sentiment climbs to highest level in three years

The president of the Ifo Institute said companies assessed their current business situation more positively and the economy continued to recover.

German business sentiment rose for a fifth straight month in September to its highest level since May 2023, as the country’s tentative economic recovery holds.

The Ifo Institute said companies assessed their current business situation more positively and their expectations brightened again.

The Ifo Institute said Thursday that its business-climate index, based on around 9,000 monthly responses from businesses, increased to 89.9 in September from 88.8 in August. That was a little better than consensus expectations of 89.0 by economists polled by The Wall Street Journal.

“Companies assessed their current business situation more positively. Their expectations brightened again. The German economy continues its recovery,” said Clemens Fuest, president of the Ifo Institute.

Meanwhile, a group of major German economic-research institutes, which includes Ifo, said Thursday that the country’s economy had recovered significantly more strongly than expected, driven by strong exports and a robust manufacturing sector.

The semi-annual Joint Economic Forecast said the German economy would now grow 1.3% this year and 1.1% in 2027, an upward revision of 0.7 and 0.2 percentage points, respectively, from the prior March forecast.

“The economy has developed more robustly than expected. However, the recovery rests on a narrow foundation, as high energy prices and structural problems continue to weigh on economic activity,” said Oliver Holtemoeller, an economist at Halle Institute for Economic Research.

Write to Ed Frankl at edward.frankl@wsj.com