{"id":28026,"date":"2026-05-25T18:46:15","date_gmt":"2026-05-25T15:16:15","guid":{"rendered":"https:\/\/fajr.news\/?p=28026"},"modified":"2026-05-25T18:46:15","modified_gmt":"2026-05-25T15:16:15","slug":"german-business-outlook-improves-for-first-time-since-middle-east-war","status":"publish","type":"post","link":"https:\/\/fajr.news\/?p=28026&lang=en","title":{"rendered":"German business outlook improves for first time since Middle East war"},"content":{"rendered":"
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German Business Outlook Shows First Improvement Amidst Regional Tensions<\/h1>\n

(May 22)<\/strong><\/p>\n<\/header>\n

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Germany’s business outlook has shown its first signs of improvement since the outbreak of conflict in the Middle East, signaling a degree of resilience for Europe’s largest economy in the face of ongoing geopolitical challenges.<\/p>\n

The closely watched expectations index from the Ifo institute registered a rise to 83.8 in May<\/mark>, up from a revised 83.5 in the preceding month. This modest but significant uptick surpasses the median estimate from a Bloomberg survey of economists and marks the first positive shift in three months. Furthermore, a separate gauge measuring current business conditions unexpectedly saw an increase, adding to the cautiously optimistic sentiment.<\/p>\n

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“After the shock of the war, which could be seen in March and April, we now have a slight stabilisation,” Ifo president Clemens Fuest told Bloomberg Television on Friday. “Businesses are trying to adapt to this new situation. Nevertheless they\u2019re facing challenges.”<\/p>\n<\/blockquote>\n

Despite these glimmers of hope, Germany, much like the rest of Europe, continues to grapple with economic headwinds. The broader Middle East conflict is contributing to inflationary pressures and eroding confidence among households and firms. In response, the government has already halved its growth forecast for this year<\/mark>, and recent business surveys indicate a second consecutive month of shrinking private-sector activity in May.<\/p>\n<\/section>\n

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Mixed Economic Signals and Political Pressures<\/h2>\n

On a more positive note, separate data released on Friday revealed a surge in exports coupled with higher government spending. These factors successfully offset flat consumer demand and a decline in investment, ensuring a 0.3% expansion in the first quarter (1Q)<\/mark>, aligning with earlier estimates. This outcome offers a small reprieve for German Chancellor Friedrich Merz, who faces considerable pressure to reignite growth through comprehensive reforms. Europe’s largest economy has struggled to achieve meaningful expansion for three years, a situation exacerbated by internal government disagreements.<\/p>\n

However, analysts remain cautious. Carsten Brzeski, global head of macro at ING, issued a warning that robust trade performance is unlikely to be repeated. He anticipates companies will maintain higher inventory levels, private consumption is improbable to recover significantly, and elevated interest rates will continue to hamper activity in the crucial construction sector.<\/p>\n

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“This leaves the public sector as the only possible source of growth in the second quarter,” Brzeski stated, concluding with a sobering assessment: “That\u2019s not a very promising outlook.”<\/p>\n<\/blockquote>\n<\/section>\n

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Corporate Outlook: A Tale of Two Halves<\/h2>\n

With the Bundesbank forecasting stagnation for the current quarter, some prominent German firms are already expressing pessimism. Industrial giant Thyssenkrupp AG has revised down its sales outlook, now predicting flat annual revenue at best. Similarly, Volkswagen AG, already contending with tariffs, fierce Chinese competition, and flagging demand, reported a slip in its 1Q operating margin.<\/p>\n

Conversely, other major players retain a more optimistic view. BMW AG anticipates a stabilization of demand in China and hopes for a reversal of US President Donald Trump’s latest threat to impose higher tariffs on European cars. Siemens AG, demonstrating confidence, announced plans to repurchase as much as \u20ac6 billion (RM27.6 billion)<\/mark> of shares following a rise in orders.<\/p>\n

Ifo president Fuest reiterated a pragmatic short-term outlook: “We\u2019ll probably get something like stagnation in the second quarter. It may even be slightly negative but we don\u2019t see a recession.”<\/p>\n<\/section>\n