Pessimism prevails in the German economy

BERLIN - Photos: dpa

Creation Date: February 25, 2025 11:20

In February, the ifo Business Climate Index was recorded at 85.2 points, as in January. While experts expected a slight improvement in the index, the index, one of the most important indicators of the German economy, remained at low levels. In the last 12 months, the index had only seen a lower level in December 2024, at 84.7 points.

PESSIMISTIC ASSESSMENT In the survey, in which approximately 9,000 companies participated, companies assessed their current business situation more pessimistically than the previous month. While companies assessed their current situation with 85.0 points, this rate was measured as 86.0 points in January. However, there was a slight improvement in expectations for the coming months. Expectations increased from 84.3 points to 85.4 points. Ifo President Clemens Fuest summarized the situation by saying, “The German economy is on hold.”

'A CLEAR GLANCE OF HOPE' Companies in the manufacturing sector assessed their current situation more pessimistically. However, due to the positive expectations for the future, ifo expert Klaus Wohlrabe described the rising expectations in the industry as a "clear glimmer of hope". Wohlrabe pointed to one of the reasons for the recovery by saying, "The bottom in industrial orders seems to have been overcome."

‘PESMISTIC VOICES HAVE INCREASED IN TRANSPORTATION’ It was stated that US President Donald Trump’s tariff threats have not had any positive or negative impact on the German economy for now. However, experts pointed out that this situation could change if high penalty duties are imposed on European goods. Wohlrabe said, “It remains to be seen how companies will react to the results of the German federal elections,” and added that he expects a CDU/CSU-SPD coalition. The business climate has also deteriorated in the service sector. Companies reported that their current business situation has worsened and expectations for the upcoming period have also become negative. ifo President Fuest made the statement, “Pessimistic voices have increased, especially in the transportation and logistics sector.”

CURRENT BUSINESS SITUATION WORSE In the retail sector, the index rose with the improvement in expectations. In the construction sector, while the lack of orders continued to be the main problem, expectations were better in February compared to the previous month. However, the current business situation worsened.