Business confidence in Germany has unexpectedly weakened, according to the latest data released by the Ifo Institute. The Ifo Business Climate Index, a key indicator of German economic sentiment, fell to 87.7 points in September, a decline from 88.9 points recorded in August. This result contrasts with expectations of a slight increase among analysts.
The report indicates a decrease in satisfaction among businesses concerning current operations. Notably, forward-looking expectations have also dimmed considerably, tempering hopes for an economic recovery.
Within the manufacturing sector, the index registered a downturn. Companies expressed a less favorable assessment of their current situation and future expectations became more hesitant. New orders experienced a further decrease. A glimmer of optimism observed in the previous month among manufacturers of capital goods has now faded.
The service sector experienced a tangible deterioration in business sentiment. Expectations plummeted to the lowest level since February, while assessments of the current situation were also revised downwards. The transportation and logistics sub-sector experienced a particularly pronounced decline in morale.
The retail sector also saw a softening of business climate. This was primarily attributed to more pessimistic expectations, although assessments of the current situation were marginally improved. The business climate index rose within the retail trade but decreased in the wholesale trade.
In the construction industry, the index rebounded after last month’s decrease. Companies expressed slightly increased satisfaction with ongoing projects and expectations for the coming months remained positive.