Sentiment across major German companies remained steady at 87.6 points in January, according to the Ifo Institute’s monthly index. Analysts had expected a modest uptick from the Munich-based foundation’s survey of around 9,000 business leaders, but the headline figure held firm.
“Assessments of the current situation edged up somewhat, while expectations were revised slightly downward,” Ifo President Clemens Fuest said. “The German economy is starting the new year with little momentum.”
Germany’s economy has struggled in recent years, showing only marginal GDP growth of 0.2% in 2025 in provisional figures, with similarly slight contractions in the two years before. Chancellor Friedrich Merz has highlighted improving the economic situation as a key goal for 2026.
The manufacturing sector saw a sharp improvement in the index. Companies reported more positive current conditions and less pessimistic expectations, Fuest said. However, capacity utilization in industry fell from 78.1% to 77.5%, remaining below the long-term average of 83.2%.
By contrast, the services sector showed a worsening climate for both current conditions and expectations, with tourism cooling noticeably. Indices for trade and construction rose, and both retail and wholesale rebounded, though they remain well below their long-term averages.
Germany’s central bank expects the slow growth trend to persist into the first quarter of 2026, and economists are forecasting roughly 1% growth for the year as a whole.
Edited by: Wesley Dockery