The Ifo Institute's survey showed that sentiment among the German companies improved in January after reaching its lowest level since May 2020 in December.
According to the report, the Ifo business climate index rose to 85.1 from 84.7 in December. Economists had expected the index to remain unchanged. Across sectors, the index deteriorated in industry and construction, while it rose significantly for services and remained unchanged in retail.
The details of the report showed that the current situation sub-index increased to 86.1 (the highest reading since August) from 85.1 in December, while economists predicted growth to 85.4. Meanwhile, the expectations index, which measures the six-month outlook from the business perspective, declined to 84.2 (the lowest value since January 2024) from 84.4 last month. Consensus estimates also suggested a drop to 84.2 points.
In December, Germany’s central bank cut its 2025 and 2026 GDP growth projections for the country. The Bundesbank forecast that output would grow a mere 0.2% in 2025, down from a June forecast of 1.1%. It also predicted growth of 0.8% for 2026, well down on the previously expected 1.4%.