Germany's Ifo Business Climate Index Ends 2025 on a Downbeat Note

06:58 AM EST, 12/17/2025 (MT Newswires) -- The business climate in Germany unexpectedly deteriorated in December 2025, with the indicator dropping to its lowest level since May 2025, mainly driven by growing pessimism among local companies about the economy as they head into the new year. The ifo business climate index declined to 87.6 points in December from the revised 88 points in November, data from the ifo Institute showed Wednesday. The latest reading came in below the consensus estimate of 88.2 points. "For the German economy, the year has ended as it started: with a disappointing Ifo index reading," ING said. "Admittedly, despite today's drop, the absolute level is still higher than at the start of the year (when it was 85.1)." Ifo said the business climate in the services industry slipped back into negative territory, with the indicator falling to -2.1 points from 0.6 point as sentiment weakened among all companies in the sector apart from those in the restaurant business. Sentiment in the manufacturing industry declined to -14.8 points from -13.8 points as companies plan to reduce their production amid lower new orders, while the business climate in the trade sector also fell to -24.6 points from -22.6 points. Businesses in both sectors expressed pessimistic expectations for the first half of 2026. Meanwhile, sentiment in the construction sector held steady at a low level of -15.2 points. Companies' assessment of their current situation was worse than before, although they are "less skeptical" regarding expectations over the next few months. "All in all, following the principle of 'prepare for the worst and hope for the best', today's Ifo index reading doesn't come as a surprise. To the contrary, it fits into our base case scenario that the German economy will end the year with yet another growthless quarter," ING noted. "However, there is sufficient evidence to suggest that the German economy will leave stagnation behind next year, even though any cyclical rebound should definitely not be mistaken for a structural improvement."