Sentiment among major German companies held steady at 87.6 points in January, the Ifo Institute’s monthly index showed. Analysts had anticipated a modest rise after the Munich-based institute surveyed roughly 9,000 business leaders, but the headline figure remained unchanged.
Ifo president Clemens Fuest said assessments of current conditions had edged up slightly, while expectations were pared back, adding that the German economy is starting the new year with little momentum.
Germany has struggled to generate growth in recent years: provisional figures show GDP grew only 0.2% in 2025, after slight contractions in the two prior years. Chancellor Friedrich Merz has made improving the economic situation a priority for 2026.
The manufacturing sector recorded a marked improvement, with firms reporting better current conditions and less pessimistic expectations. At the same time, industrial capacity utilization slipped from 78.1% to 77.5%, remaining below the long-term average of 83.2%.
By contrast, the services sector saw both current conditions and expectations weaken, with tourism cooling noticeably. Indices for trade and construction improved, and retail and wholesale activity rebounded, though both remain well under their long-term norms.
Germany’s central bank expects the slow-growth trend to continue into the first quarter of 2026, and economists are projecting roughly 1% growth for the year as a whole.
Edited by: Wesley Dockery