German business activity surges at fastest pace in 10 months

Germany's private sector grew at its fastest pace in 10 months in March as the S&P Global Composite Purchasing Managers’ Index rose to 50.9 from 50.4 in February, remaining above the threshold separating growth from contraction. Such optimism is attributed to expectations of large-scale government investment, which could mitigate the damage done by US import duties.

According to Cyrus de la Rubia, an economist at Hamburg Commercial Bank, the German economy has reached rock bottom, and there is a chance of a cyclical upturn. He says that the fiscal package could compensate for the hit from US tariff policy.

Investor confidence, according to the ZEW Institute, reached a three-year high on expectations of increased spending on defense and infrastructure. It’s also hoped that the new government headed by Friedrich Merz may introduce measures to stimulate growth — from cutting bureaucracy to reforming migration policy. 

Nevertheless, according to the Bundesbank, GDP will advance only moderately in the first quarter as the underlying trend remains weak. The main risks are still related to US tariffs and a sluggish services sector, Bloomberg reports.