The mood among German business leaders took a hit in November, according to a recent survey by the ifo Institute economic think tank. The ifo Business Climate Index, which surveys approximately 9,000 companies in Germany, dropped by 0.8 points to 85.7. Analysts had predicted a smaller decrease to 86.0. This decline comes at a time of political uncertainty in Germany after the collapse of the coalition government and the upcoming U.S. election.
With new elections scheduled for February and the looming threat of increased tariffs on exports to the U.S. under a possible new Trump administration, German businesses are facing challenges. Economist Philipp Scheuermeyer noted that the election results in the U.S. could further impact the already struggling German export industry.
The index’s improvement in October was short-lived, as it now approaches the low point of 85.4 set in September 2024. The survey indicated that companies in the manufacturing sector were particularly pessimistic about the future, while the service and construction industries also showed a decline in sentiment.
Although there was a slight uptick in the trade sector, ifo President Clemens Fuest emphasized that overall business sentiment remains negative. Fuest described the German economy as “floundering,” pointing to its contraction in 2023 and a lackluster 0.1% growth in the third quarter of this year.
The challenges facing the German economy are multifaceted, with ongoing political instability, global trade tensions, and weak demand contributing to the negative business outlook. As the country navigates these obstacles, it will be crucial for policymakers and industry leaders to work together to support economic recovery and sustainable growth.
