German business morale improves despite price worries, Ifo data show

• The Ifo business climate index for September stood at 89.9, compared to an expected 89.1.
• The previous reading was 88.8.
• The business expectations index came in at 90.4 in September, exceeding the forecast of 89.3.
• The prior reading was 89.1, later revised to 89.0.
• The current assessment index hit 89.5 in September, above the 89.0 forecast.
• That compared with 88.5 in the prior period.

The Ifo business climate index for Germany rose again in September, reaching its highest point since May 2023. The latest survey points to an improving mood among businesses.

The expectations sub-index posted its fifth consecutive monthly increase, climbing to its highest since February. This highlights a more optimistic outlook for the German economy, even as higher energy prices create headwinds.

Despite the encouraging trend, it remains uncertain whether the improved sentiment will translate into solid economic data in the coming months. Oil prices hovering near $100 and bond yields set to rise further are key risks. Higher oil costs could fuel inflation, push up input and output prices, and squeeze business margins. Meanwhile, rising bond yields may tighten financial conditions and make credit more difficult to obtain.

These factors should be weighed alongside the upbeat data as the third quarter draws to a close.