German Ifo business sentiment hit seven-month high in January

Business confidence in Germany improved in January to its highest level since June, adding to signs of resilient activity at the beginning of the year as optimism returns amid easing concerns over an imminent recession.

The Ifo business-climate index rose to 90.2 in January from 88.6 in December, posting a fourth-consecutive monthly improvement, data from the Ifo Institute showed Wednesday. The rise is broadly in line with expectations from economists polled by The Wall Street Journal.

January data showed business confidence continues to recover from September’s low. However, sentiment remains subdued compared to the situation prior to the Ukraine war, when the index stood at 98.8.

“Sentiment in the German economy has brightened,” Ifo President Clemens Fuest said. “The German economy is starting the year with more confidence,” he said.

The recent fall in natural-gas prices, the implementation of the government’s energy price cap for firms and China’s swift reopening are likely to have lifted moods over the short-term outlook.

The Ifo’s gauge measuring expectations increased to 86.4 from 83.2. However, the index assessing the current situation fell slightly to 94.1 in January from 94.4 in December.

The Ifo index is based on a poll of about 9,000 companies in manufacturing, services, trade and construction.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com