Ifo Report: German business sentiment worsens in November

Business sentiment in Germany declined again in November, with the Ifo Business Climate Index falling to 85.7 points from 86.5 in October, according to data released by the German economic institute Ifo. This drop follows a brief improvement in October, which had interrupted four consecutive months of worsening sentiment. Analysts surveyed by Reuters had anticipated a smaller decline to 86 points, underscoring the unexpectedly weak economic outlook.

The latest decline reflects a more negative assessment of the current economic situation, while expectations for future developments saw a less pronounced decrease. Ifo President Clemens Fuest described the situation bluntly, stating that “the German economy lacks strength.”

Germany’s gross domestic product grew by 0.1 percent in the third quarter compared to the previous quarter, according to the Federal Statistical Office. This final figure, slightly lower than the preliminary estimate of 0.2 percent, still represents an unexpected gain for Europe’s largest economy during a challenging period.

Sentiment in Germany’s manufacturing sector weakened further as businesses expressed growing scepticism about future developments. The services sector experienced a marked decline, with companies reporting a worsening of both their current situation and expectations. While the wholesale and retail trade sectors showed slight improvement, the construction sector recorded a significant drop in sentiment, reflecting persistent difficulties within the industry.

As the largest economy in Europe and the Czech Republic’s most important trading partner, Germany’s economic performance has substantial implications for its neighbors. Many Czech companies are deeply connected to the German market, and any sustained economic slowdown in Germany could have significant ripple effects on Czech exports and industrial output.

Despite the modest GDP growth in the third quarter, the Ifo report highlights persistent challenges across key sectors, suggesting that Germany’s economic recovery remains fragile and uneven.

Source: Ifo Business Climate Index and CTK