ifo Business Climate Index | Germany

Gloomy view of the future

The mood in the economy is deteriorating.
Imago / ANP
The mood in the economy is deteriorating.

The multiple crises are having an impact on the mood in the German economy. Many companies are pessimistic about the future, as the ifo business climate index suggests. The hospitality industry in particular fears bad times.

As a result, the ifo Business Climate Index fell to 84.3 points in September, down from 88.6 points in August. This is the lowest value since May 2020, with the decline extending across all four economic sectors.

Expectations in part at historic lows

Companies clearly assessed their current business situation as worse. Pessimism with a view to the coming months has increased significantly. In the retail sector, expectations even fell to a historic low. The German economy is sliding into recession.

In the manufacturing sector, the index fell noticeably. Companies were more dissatisfied with current business. They are looking ahead to the next six months with great concern. Expectations were last this pessimistic in April 2020. Sentiment deteriorated in almost all sectors. The order backlog continued to decline.

Hospitality industry pessimistic

In the service sector, the business climate index plummeted. Assessments of the current situation were significantly worse. Companies also expect a further noticeable deterioration in the coming months. The hospitality industry in particular fears hard times.

In the retail sector, the business climate deteriorated again. The business situation turned negative for the first time since February 2021. The outlook also darkened further.

In the construction sector, the index fell noticeably. Companies were less satisfied with current business. Expectations were more pessimistic than in the previous month.

About the ifo Business Climate
The ifo Business Climate is based on around 9,000 monthly reports from companies in manufacturing, services, trade and construction. Companies are asked to assess their current business situation and report their expectations for the next six months. They can mark their situation as "good," "satisfactory" or "poor" and their business expectations for the next six months as "more favorable," "unchanged" or "less favorable."

The balance value of the current business situation is the difference between the percentages of "good" and "poor" responses, and the balance value of expectations is the difference between the percentages of "more favorable" and "less favorable" responses. The business climate is a transformed average of the balances of the business situation and expectations. To calculate the index values, the transformed balances are each standardized to the average for 2015.

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