The optimism that double-digit inflation peaked and a deep recession would be avoided led to a recovery in business confidence in Germany.
Business confidence rose to 88.6 in December, according to data from the IFO Institute. The expectation of economists surveyed by Bloomberg was 87.5. November data was also revised to 86.4.
The expectations index rose from 80.2 to 83.2, beating the estimates of 82. The current conditions index also rose from 93.2 to 94.4. The index has fallen for the last 6 months in a row.
IFO President Clemens Fuest stated that the outlook for the German economy has improved significantly and said, “German companies are entering the holiday season with hope.”
Inflation in the country declined to 11.3 percent in November due to the decrease in energy costs. Inflation had peaked at 11.6 percent the previous month. The fact that the gas tanks in the country were full reduced the concerns that there would be problems in the coming months.
Despite this optimism, the Bundesbank expects the economy to contract in the first half of next year. However, the recession is not expected to be as deep as feared.