Germany July IFO expectations index 90.7: est. 91.1

Germany July IFO expectations index 90.7: est. 91.1

The German economy's business climate, as measured by the IFO Business Climate Index, saw a marginal improvement in July 2025. The index, which tracks the sentiment and expectations of German companies, rose to 88.6 points, up from 88.4 points in June [1]. This increase was driven by a slight uptick in companies' assessments of their current business situation, although expectations for the next six months remained largely unchanged.

The IFO Business Climate Index is based on responses from approximately 9,000 businesses across manufacturing, services, trade, and construction sectors [2]. The index measures the balance between positive and negative responses to questions about the current business situation and future expectations.

In manufacturing, the index rose, with companies reporting a noticeably better current situation and brighter expectations. However, incoming orders still lacked momentum, and capacity utilization only rose slightly from 77.0 to 77.2 percent [1]. In the services sector, the business climate deteriorated, with current business activity assessed less favorably, and expectations revised slightly downward. The transport and logistics sector, however, showed a positive development, with the business climate improving noticeably [1].

In trade, the index weakened somewhat due to more pessimistic expectations, despite a slight improvement in the current situation. The construction sector also saw an improvement, with both assessments of the current situation and expectations rising. However, a lack of orders remained a significant problem [1].

The Ifo Business Cycle Clock indicates that the German economy is currently in the "recovery" quadrant, with improving but below-average business expectations and a below-average business situation on balance [2]. The ifo Business Uncertainty measure, which indicates how difficult it is for managers to predict the development of their company's business situation over the next six months, remains high, suggesting that uncertainty about the economic outlook persists.

Despite the slight improvement in the IFO Business Climate Index, expectations fell short of market estimates. The index for expectations was 90.7, compared to an estimated 91.1 [3]. This discrepancy highlights the cautious optimism among German companies regarding the economic outlook.

In conclusion, while the German business climate has shown signs of improvement, the recovery remains slow, and uncertainty persists. The IFO Business Climate Index provides valuable insights into the sentiment and expectations of German companies, helping investors and financial professionals make informed decisions about the German economy.

References:

[1] https://tradingeconomics.com/germany/business-confidence
[2] https://www.ifo.de/en/facts/2025-07-25/ifo-business-climate-rises-slightly-july-2025