The mood in the German economy improved in December for the third time in a row. The Ifo business climate rose by 2.2 points to 88.6 points compared to the previous month, as the Ifo Institute announced on Monday in Munich. Both the current situation and expectations brightened.

“The German economy draws hope at Christmas,” remarked Ifo President Clemens Fuest. The mood brightened in each of the sectors under review, only in construction did the business climate deteriorate.

From spring to late summer, economic sentiment had mostly fallen. The triggers were the Russian war of aggression against Ukraine and the resulting sharp rise in energy prices.

Economists warn against overconfidence

Economists acknowledged the better mood, but also warned against overconfidence. The business climate is still pointing to a recession, i.e. an economic contraction, said Thomas Gitzel, chief economist at VP Bank. “But if you consider the horror scenarios that were still in the air until recently, the year ends on a light note.”

Analyst Jens-Oliver Niklasch from Landesbank Baden-Württemberg commented cautiously: “The very recent developments are likely to dampen expectations again soon.” These included the significant decline in gas storage levels or the fear of further increases in key interest rates.