German business confidence improved to an eight-month high in March, reaching an index of 86.7, up from 85.3 in the previous month. The current situation index increased to 85.7, while the expectations index reached a nine-month high of 87.7. The ifo Institute President Clemens Fuest attributed this improvement to defense and infrastructure spending plans, which offset concerns about US trade policies. Despite the positive outlook, economists caution that sentiment could be affected by new US tariffs announced on April 1.

The German economy has shrunk for a second consecutive year, marking the first time in over two decades. This decline has been attributed to factors such as subdued domestic demand, high energy prices, and increased competition from imports. The country's industrial companies, including Volkswagen, have cut production and jobs, while the construction industry faced challenges due to higher raw material prices and elevated interest rates. The economic struggles contributed to the collapse of the Olaf Scholz government and an early election scheduled for February 23rd.