German business morale unexpectedly rose in May, a survey showed on Friday, offering a glimmer of hope for Europe's largest economy.
The Ifo institute said its business climate index increased to 84.9 from a revised 84.5 in April.
Analysts had forecast a decrease to 84.2.
"Following the slump in March and April, business sentiment in Germany has recovered slightly," Ifo President Clemens Fuest said.
Germany's economy has struggled to regain momentum since the pandemic, as rising competition from China and higher energy prices have strained its export-driven model.
The surge in energy prices triggered by the war in Iran poses a further threat to its long-awaited recovery.
"The German economy is stabilising for the time being, but the situation remains fragile," Fuest said.
Businesses were slightly more satisfied with their current operations, with the index rising to 86.1 from 85.4 in April.
The outlook for the coming months was also less pessimistic, Ifo said, with the corresponding index rising to 83.8 from 83.5 in the previous month.
