German business sentiment improved for a third consecutive month in July, defying analyst expectations and signaling a cautious shift in the outlook of Europe's largest economy.
The Ifo business climate index rose to 86.6 from a slightly upwardly revised 85.7 in June, surpassing economists' forecast of 86.0. The gains were driven by a sharper lift in forward-looking sentiment, with the expectations sub-index climbing to 86.7 from 84.3. However, the assessment of current conditions deteriorated slightly, as the current business performance index dipped to 86.5 from 87.0.
Ifo president Clemens Fuest noted that despite uncertainty surrounding the situation in the Persian Gulf, the German economy was displaying reduced pessimism. The survey suggests companies are looking past near-term geopolitical risks to focus on a more hopeful medium-term trajectory.