Germany – Ifo lags behind

The Ifo Business Climate did not rise further in February, but remained at the low level of 85.2. This was slightly weaker than expected (consensus: 85.8, Commerzbank: 85.5).

Behind the Ifo indicator's stagnation are opposing movements of its two sub-components. While business expectations for the next six months recovered noticeably (85.4 after 84.3), the assessment of the current business situation was again more pessimistic (85.0 after 86.0). As far as the major sectors are concerned, a decline in the service sector offset the slightly better sentiment in the other sectors.

Ifo not yet pointing upwards

As the chart below shows, the Ifo business climate remains at a very low level. Unlike the Purchasing Managers' Index or incoming orders, there are still no signs of a recovery in the Ifo Business Climate.

All in all, the leading indicators confirm that the German economy will see little upward movement starting in spring. The ECB has lowered its interest rates since mid-2024 and private consumption is benefiting from wages rising faster than consumer prices. However, companies are likely to remain reluctant to invest, as Germany's competitiveness has massively eroded since the Merkel years.

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