The Ifo institute said its business climate index rose to 90.2, in line with consensus according to a Reuters poll of analysts and up from a reading of 88.6 in December.
“The German economy is starting the new year with more confidence,” Ifo’s president Clemens Fuest said.
The increase is driven by considerably less pessimistic expectations, while companies were, however, somewhat less satisfied with their current situation, Ifo said.
“There probably won’t be a recession, but GDP could shrink slightly in the first quarter,” Ifo’s economist Klaus Wohlrabe said.
Franziska Palmas, senior Europe economist at Capital Economics noted that present conditions remained challenging.
“The fall in its current conditions index is a reminder that the economy is not out of the woods yet.”
The euro zone largest economy is expected to narrowly avoid recession this year with price-adjusted growth of 0.2%, according to the German government’s…