By Maria Martinez
BERLIN, Feb 23 (Reuters) – German business morale rose slightly more than expected in February, reaching its highest level since August and pointing to the German economy finally turning a corner.
The Ifo institute said on Monday its business climate index rose to 88.6 in February compared to 87.6 the previous month. Analysts polled by Reuters had forecast a rise to 88.4.
“The German economy is showing the first signs of a recovery,” said Ifo’s president Clemens Fuest.
Companies were more satisfied with their current business situation, with the index rising to 86.7 in February from 85.7 in January.
“Although the German Ifo remained quite weak in February, we still think economic conditions in Germany are improving,” said Franziska Palmas, senior Europe economist at Capital Economics.
Expectations also brightened, with the index at 90.5 in February, up from 89.6 in the previous month.
“Given the strong order intake in the manufacturing sector, an increase in the Ifo business climate was overdue,” said Sebastian Wanke, senior economist at KfW.
German industrial orders rose unexpectedly in December, posting their biggest increase in two years.
Germany’s Composite Purchasing Managers’ Index showed on Friday that business activity growth accelerated to a four-month high in February, driven by improved performance in services and the first manufacturing expansion in over three-and-a-half years.
“We are seeing increasingly clear signs that the economy is gaining momentum,” said Robin Winkler, chief economist for Germany at Deutsche Bank.
The climate index improved in all sectors but trade, in which companies assessed their current situation as worse.
Carsten Brzeski, global head of macro at ING, however, said renewed tariff uncertainty following a change in U.S. policy, a stronger euro and the recent winter weather, form a long list of potential downside risks.
“All in all, today’s Ifo index paints a picture of what a nice and decent cyclical upswing could look like,” Brzeski said.
(Reporting by Maria Martinez and Friederike Heine, Editing by Linda Pasquini and Emelia Sithole-Matarise)
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