German business sentiment improves in March - Ifo

German business sentiment improved in March, according to a survey released on Friday by the Ifo Institute.

The business climate index rose to 87.8 from 85.7 in February, coming in comfortably above consensus expectations of 86.0.

The current situation index increased to 88.1 in March from 86.9 the month before, while the expectations index printed at 87.5, up from 84.4.

The manufacturing gauge improved to -10 from -17.1, while the service sector index rose to 0.3 from -4.0. The index for trade rose to -22.9 in March from 30.8 in February, while the construction gauge was -33.5 versus -35.4.

Ifo Institute president Clemens Fuest said: "The German economy glimpses light on the horizon."

Andrew Kenningham, chief Europe economist at Capital Economics, said: "Although the Ifo business climate index rose quite sharply in March, much of the improvement was in the volatile expectations component and it remained at an exceptionally low level. We still think the economy is likely to contract for a second successive quarter in Q1.

"Looking ahead, the outlook remains very gloomy. Stagnant real incomes, the continued drag from high interest rates, weak external demand and tight fiscal policy all suggest that the economy is unlikely to grow much, if at all, over the rest of the year."