Ifo's March survey found an unexpected fifth successive improvement in overall business sentiment. A 2.2 point gain versus February's unrevised 91.1 put the headline index at 93.3, its strongest reading since just before the Russian invasion of Ukraine in February last year and more than 2 points above the market consensus.

Current conditions were up 1.5 points at 95.4. This more than reversed the cumulative 0.5 point drop seen in the previous two months and made for a 7-month peak. Expectations rose a slightly larger 2.8 points, their sixth straight gain, and at 91.2, posted their best reading since February 2022.

At a sector level, all of the main categories recorded stronger sentiment this month, notably services (8.9 after 1.3) and manufacturing (6.6 after 1.5). Despite the turbulence at some domestic and international banks, Ifo noted that the German economy is stabilizing.

Today's surprisingly firm results lift the German ECDI to 25 and the ECDI-P to 36, both values showing that overall economic activity is now moving rather faster than financial markets anticipated.

The business climate index is not expected to improve for a fifth month in a row, instead edging lower in March to 90.9 versus February's 91.1.

Ifo is an acronym from Information and Forschung (research). Published by Munich's Ifo Institute, the Business Climate Index is closely watched as an early indicator of morale in German industry. In addition to overall gauge of sentiment, data are provided on its two components, current conditions and expectations. As a forward looking indicator, the latter is normally seen as the more important. Ifo surveys more than 9,000 enterprises in manufacturing, services, construction, wholesaling and retailing and a separate estimate of sector confidence is supplied for each.

The headline index has a good correlation with developments in overall GDP and so has a major influence in shaping views on how the national economy is performing. The main focus is the expectations index.