Business sentiment in Germany has slightly improved. The Ifo Business Climate Index rose to 85.1 points in January, up from 84.7 points in December, according to the Ifo Institute’s announcement on Monday.
The increase was primarily driven by a more positive assessment of the current situation. However, expectations again fell short of optimism. The German economy remains pessimistic.
In the manufacturing sector, the business climate has deteriorated further. The skepticism of companies regarding the coming months has increased again. On the other hand, the current business situation was better evaluated. The number of new orders continues to decline. Capacity utilization remained nearly unchanged at 76.5 percent, which is still significantly lower than the long-term average of 83.4 percent.
In the service sector, the index has risen significantly. Companies showed a marked satisfaction with their ongoing business. Expectations also brightened, but remained marked by skepticism, particularly among IT service providers.
In trade, the business climate remained unchanged. Traders evaluated their current situation more positively, particularly in the wholesale trade. However, expectations fell slightly, driven by the retail trade.
In the construction industry, the business climate has darkened again. This was due to worse expectations of the companies. On the other hand, the current situation was slightly better assessed.
The Ifo Business Climate Index is considered a key early indicator of the economic development in Germany. It is based on around 9,000 monthly reports from companies in the manufacturing, service, trade and construction sectors. The companies are asked to evaluate their current business situation and report their expectations for the next six months.