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.
Ifo President Clemens Fuest said it wasn’t surprising that the outlook is improving because activity “is starting from such a low level.” He also said uncertainty remains high and companies aren’t confident enough to increase headcount yet. In its earnings report on Monday, Germany’s SAP SE said it’s “maintaining a slower pace of hiring than in usual circumstances.”
“Companies do see the situation as a fragile one, as being fraught with uncertainty,” Fuest said in a Bloomberg Television interview. “They are planning to reduce the workforce further at this moment. So there’s no turnaround yet at the labor market.”