German business morale rises more than expected in September, Ifo finds

German business morale increased more than anticipated in September, according to a survey conducted by the Ifo institute, a report revealed on Thursday. This surge indicates that the largest economy in Europe is coping well with the energy price crisis, which has led to record-high fuel costs. The Ifo institute stated that the business climate index climbed to 89.9 in September from 88.8 in August.

Experts polled by Reuters had anticipated a rise to 89.0. This figure is the third piece of evidence this week that a recovery is underway, following flash PMI data released on Wednesday, which showed German business activity expanding at its quickest pace in nearly a year. Additionally, the country's five leading economic institutes released a joint autumn forecast, raising 2026 growth expectations to 1.3% from 0.6%.

The Ifo gauge of expectations also rose to 90.4 from 89.1 in August, while companies' assessment of their current situation improved to 89.5 from 88.5, the institute reported. Any such improvement would be beneficial for Chancellor Friedrich Merz, whose conservative party suffered their worst state election result since 1949 in Mecklenburg-Western Pomerania on Sunday, as voters blamed the government in part for the rising cost of living.

In response, the Merz government has announced a reduction in fuel taxes by €0.17 ($0.19) per litre, effective from October 1 until the end of the year.