Volkswacht Bodensee - Germany business morale falls as hopes for revival dim

The Ifo institute's confidence barometer dipped to 88.1 points from 88.4 points in October. Analysts surveyed by financial data firm FactSet had expected a reading of 88.3 this month.

"Sentiment among companies in Germany has deteriorated," said Ifo president Clemens Fuest.

"They have little faith that a recovery is coming anytime soon."

After two years of recession due to an industrial slump and weak demand, Chancellor Friedrich Merz earlier this year promised a barrage of measures, including a public spending blitz, to reboot Europe's top economy.

But criticism is mounting that the plans are moving too slowly, hobbled by political bickering, bureaucratic inertia and a lack of focus on deep-rooted reforms.

In the latest Ifo survey, companies' expectations for the future fell particularly heavily, which LBBW bank economist Jens Oliver-Niklasch described as alarming.

"We have not moved forward since the summer," he said, adding that Merz's promised "autumn of reforms" had failed to materialise.

Expectations for the months ahead in the key manufacturing sector took a significant hit, according to the Ifo survey, which noted companies reported lower order books.

There were also declines in morale in the trade construction sectors.

However the picture in the service sector brightened, with morale improving once again.

Despite Monday's disappointing reading, Dirk Schumacher, chief economist at German public lender KfW, noted that corporate expectations had trended up over the course of the year.

"As the days soon become longer again, growth is likely to return," he said. "We expect a noticeable increase in gross domestic product in 2026, driven primarily by fiscal stimulus."

The government forecasts growth of 0.2 percent for this year, and 1.3 percent in 2026.

G.Schmid--VB