German businesses are growing increasingly optimistic that government support at home and an unprecedented euro-area fiscal plan will bolster demand and drive an economic recovery later this year.
Expectations at companies surveyed by the country’s Ifo institute improved to 97 in July from a revised 91.6 in June, the strongest reading since late 2018. The main business climate index also improved.
The figures come days after the European Union approved a 750 billion-euro ($877 billion) package championed by Germany and France to revive growth. Europe’s largest economy will also benefit from the government’s 130 billion-euro stimulus plan announced in June to help spur household consumption and get businesses to invest again.
High-frequency data tracking indicators such as restaurant bookings and job postings show Europe’s largest economy is recovering faster than other nations. But Germany’s reliance on exports mean the pace of its rebound also depends on demand improving in key trade partners.
Last week, indicators of the private-sector activity showed that the economy expanding for the first time in five months in July. But the numbers also revealed a drop in factory employment, with 30 percent of manufacturers reporting reduced staff numbers.
The scale of the euro-area downturn will become clearer later this week, with data forecast to show gross domestic product shrank about 12% in the second quarter. Germany’s GDP contraction is predicted to have been around 9%.