German business enters 2026 without momentum. The overall ifo business climate index remains unchanged in January at 87.6 points, but behind the flat figure lies a slight shift: companies are slightly more positive about the current situation, while expectations for the next six months have become a bit more subdued.
The index is based on around 9,000 monthly responses from companies in industry, services, trade, and construction, which assess both their current situation and their expectations for the next six months.
The development is mixed across sectors. Industry is moving in a positive direction, with companies reporting a better assessment of the current business, and expectations have also become less negative. However, capacity utilisation drops slightly from 78.1 to 77.5 percent and remains below the long-term average.
Slight improvement in construction
In the service sector, the mood is going the other way. Here, the business climate is declining, and companies are slightly more pessimistic about the current situation and the coming months. According to ifo, logistics has become more sceptical, and tourism has lost momentum.
Conversely, trade is getting a noticeable boost. Both retail and wholesale report a better assessment of the current situation, and expectations have also become less pessimistic, although the levels still remain clearly below the long-term averages.
Also in construction, there is a small improvement to be seen. Companies assess the current situation a little better, while expectations are largely unchanged. Order books are still described as thin, especially in building construction, and this emphasises that the recovery is still awaited.
Overall, ifo indicates that the German economy is starting the year with limited momentum: the present looks slightly brighter, but belief in a quick turnaround is still weak.
