Germany's Ifo Business Climate Index rose unexpectedly to 89.0 in August 2025, surpassing both the forecast of 88.8 and the previous month's 88.6. This marks the highest level since 2022. The improvement was driven primarily by increased business expectations, which climbed to 91.6, above the forecast of 90.5 and the prior 90.7. However, the current conditions component slightly declined to 86.4, below the forecast of 86.7 and the previous 86.5. The rise in business sentiment follows the European Union's recent trade agreement with the United States, which has contributed to optimism among German firms despite some criticism regarding higher tariffs. The data indicates a cautiously optimistic outlook among German business managers for the coming months.