German Business Climate Flat in January

Germany’s Ifo Business Climate Index rose to 88.6 in February 2026 from 87.6 in January, slightly beating market expectations of 88.4. The reading marked the highest level since August 2025, pointing to tentative signs of recovery in Europe’s largest economy. Ifo President Clemens Fuest said stronger domestic demand and fiscal stimulus are supporting the economy, but warned that trade uncertainty continues to weigh on exporters. Firms reported greater satisfaction with current conditions (86.7 vs 85.7 January), while expectations also improved (90.5 vs 89.6). Sector-wise, sentiment strengthened in manufacturing (-11.3 vs -12.3), driven by notably better assessments of current conditions. Confidence also rebounded among service providers (0.1 vs -2.6), largely on improved expectations and led by the logistics sector, and in construction (-11.5 vs -14.3). In contrast, morale in trade edged lower (-21.8 vs -21.1), as companies viewed their current situation less favorably.

Germany’s Ifo Business Climate Index remained unchanged at 87.6 in January 2026, holding near its lowest level since May 2025 and below market expectations of 88.1, suggesting Europe’s largest economy is starting the year with little momentum. Assessments of the current situation inched up to 85.7 from 85.6, while expectations slipped slightly to 89.5 from 89.7. By sector, a decline in the service industry (-2.6 vs -2.1) offset gains in other areas, with sentiment improving among manufacturers (-12.2 vs -14.6), traders (-21.1 vs -24.6), and construction firms (-14.2 vs -14.9).

The Ifo Business Climate Index for Germany decreased to 87.6 in December 2025, the lowest in seven months, compared to a downwardly revised 88 in November and forecasts of 88.2. The expectations gauge weakened to 89.7 from 90.5, while assessments of current conditions was steady at 85.6. “Companies are more pessimistic about the first half of 2026. The year is ending without any sense of optimism", Ifo President Clemens Fuest said. The manufacturing index declined across most industries, driven by weaker expectations despite a slight improvement in the current situation. New orders fell and production plans were cut. The services business climate slipped into negative territory as current assessments and expectations worsened. Retail showed a weaker current situation and bleak expectations for early 2026 following disappointing Christmas sales. Construction remained subdued, with a weaker current situation partly offset by improved expectations.