| Consensus | Consensus Range | Actual | Previous | |
| Business Climate | 88.3 | 87.3 to 88.6 | 87.6 | 87.6 |
| Current Conditions | 86.2 | 85.9 to 86.5 | 85.7 | 85.6 |
| Business Expectations | 90.5 | 88.5 to 91.1 | 89.5 | 89.7 |
Highlights
Business sentiment in Germany remained broadly flat at the start of the year, with the business climate index holding steady at 87.6 points in January. This stability masks growing divergence across sectors and confirms that the economy is entering 2026 with limited momentum. While firms reported a slight improvement in current business conditions, expectations weakened marginally, reflecting persistent uncertainty about the outlook.
Manufacturing showed the strongest improvement. Companies assessed both current conditions and future prospects more positively, suggesting easing pressure from energy costs and supply constraints. Nevertheless, capacity utilisation declined to 77.5 percent, well below its long-term average, signalling continued slack in industrial activity.
The service sector weakened, driven by softer demand in logistics and tourism, where falling order backlogs dampened confidence. Trade offered a modest counterbalance, as both retail and wholesale firms reported improved conditions and expectations, although sentiment remains historically subdued.
Construction also improved, supported by better current assessments. However, stagnant expectations and weak order books, particularly in building construction, continue to limit recovery prospects. In essence, the latest update suggests that the German economy is stabilising unevenly, with sector-specific resilience offset by fragile demand and constrained investment. The latest update takes the RPI to minus 1 and the RPI-P to 3, meaning that economic activities continue to perform within the expectations of the German economy.
Market Consensus Before Announcement
Modest rebound expected to 88.3 for business climate from a disappointing 87.6 in December.
Definition
Ifo is an acronym from Information and Forschung (research). Published by Munich's Ifo Institute, the Business Climate Index is closely watched as an early indicator of morale in German industry. In addition to overall gauge of sentiment, data are provided on its two components, current conditions and expectations. As a forward looking indicator, the latter is normally seen as the more important. Ifo surveys more than 9,000 enterprises in manufacturing, services, construction, wholesaling and retailing and a separate estimate of sector confidence is supplied for each.
Description
The headline index has a good correlation with developments in overall GDP and so has a major influence in shaping views on how the national economy is performing. The main focus is the expectations index.