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27 Jan, 2025 09:46 27 Jan, 2025 09:46

German business sentiment improves in January - Ifo

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FrankfurtSharecast / Leonhard Niederwimmer via Pixabay

German business sentiment unexpectedly improved a little in January but companies remained pessimistic, according to a survey released on Monday by the Ifo Institute.

The business climate index rose to 85.1 from 84.7 in December, coming in above consensus expectations for it to remain unchanged.

The expectations index dipped to 84.2 in January from 84.4 the month before, while the current conditions index ticked up to 86.1 from 85.1.

The manufacturing index printed at -25.3 in January versus -24.9 the month before, while the service sector gauge rose to -2.2 from -5.6. The index for trade was unchanged at -29.5 and the index for construction fell to -28.2 from -26.2.

Ifo Institute president Clemens Fuest said: "Companies continue to be pessimistic."

Franziska Palmas, senior Europe economist at Capital Economics, said: "Despite the rise in the headline BCI, the German economy is clearly still struggling. The BCI was very low compared to its average level in the pre-pandemic period and at face value is consistent with a sharp contraction in GDP. And though the Composite PMI, published on Friday, pointed to a better performance, it was still consistent with GDP stagnating.

"All told, we continue to expect GDP to expand a little this year as rising real incomes and looser monetary policy give household spending a boost. But with sentiment still weak, the election unlikely to bring with it much fiscal loosening and struggles in industry set to continue, we think growth will remain subdued."

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