The Ifo Institute's survey showed that sentiment among the German companies declined markedly in November after the first increase in the last 6 months was recorded in October.
According to the report, the Ifo business climate index fell to 85.7 from 86.5 in October. Economists had expected a decline to 86.0. The details of the report showed that the current situation sub-index fell to 84.3 from 85.7 in October, while economists expected the index to be 85.5 points. The latest reading was the lowest since July 2020. Meanwhile, the expectations index, which measures the six-month outlook from the business perspective, declined to 87.2 from 87.3 last month. Consensus estimates suggested that the index would fall to 87.0 points.
"The German economy is lacking strength. The decline in business morale was mainly due to the poorer assessment of the current situation, although expectations also fell slightly," Ifo president Clemens Fuest said.
According to the latest forecasts by the Ifo Institute, German GDP is likely to shrink by 0.1% this year and then grow by 0.8% and 1.3% respectively over the next two years.
Meanwhile, last month the IMF downgraded the forecast of German GDP growth in 2025 to 0.8% (previously 1.3%). With such figures, Germany, which is Europe's main economy, is trivially dragging it down.