The mood in German business has slipped down a notch again. The Ifo Institute's business climate index fell in November to 88.1 points from 88.4 the previous month. It is a small drop, but it hits a sore spot: companies are less confident that a clear improvement awaits in the coming months. At the same time, they assess the current situation as slightly better than in October. The result is a picture of an economy that is holding up for now, but where belief in an imminent upturn is fading.
The Ifo index is one of the most cited temperature measurements for the German economy. Every month, around 9,000 companies in industry, services, trade, and construction answer two things: how business is going right now, and what they expect for the next six months.
Industry loses momentum
In the industry, which is traditionally Germany's economic workhorse, the business climate has declined. Companies have a darker outlook on the near future, and order books are slightly on the decline. On the other hand, the assessment of the current situation has been lifted slightly. This indicates that the concern is not about a sudden drop here and now, but about an uncertain horizon.
Services fare better
The service sector is pulling in a positive direction. Here, companies are experiencing a slightly better situation than in October, although expectations have become a bit more subdued. Ifo particularly points to a clear setback in transport and logistics, while the tourism industry, on the other hand, shows greater optimism.
Trade disappoints before Christmas rush
In the trade sector, the development is going the other way. Companies are both less satisfied with the current situation and more pessimistic about the coming months. Retail reports disappointment at the start of Christmas sales, which may be a sign that consumers are still holding back, even though inflation has come down from previous peak levels.
Construction stands on two legs
The construction and civil engineering sector has a foot in each camp. The current situation is described as improved and has been on the rise for some time. But expectations are falling again, and weak demand continues to be a stumbling block.
Economy without spark
The ifo survey hits a Germany where several other indicators also point to stagnation. Earlier in November, DIHK, the German chamber of industry and commerce, described an economy that is idling, where companies are pressured by weak demand, high costs, and declining exports. In this light, the ifo figure is yet another signal of the same: the German economy is not in free fall, but it still lacks the spark that can trigger a broad upturn.
