The mood among German businesses has noticeably worsened in recent weeks.
The Ifo business climate index dropped to 86.4 in March from 88.4 in February, the institute announced on Wednesday. The decline is mainly driven by significantly more pessimistic expectations, while assessments of the current situation have largely stayed the same. Companies report growing uncertainty, and the conflict in Iran has largely extinguished hopes of an economic rebound.
In manufacturing, the index fell after a rise in the preceding months. Expectations deteriorated sharply, and firms rate their present conditions more negatively. Energy‑intensive industries are the most affected.
The service sector’s business climate fell steeply. Although the immediate outlook is slightly better than before, expectations collapsed. The tourism and logistics subsectors, in particular, saw their prospects deteriorate dramatically.
Retail and wholesale also experienced a decline in the index. Pessimistic expectations and inflation worries dampened prospects for both wholesale and retail. Nevertheless, traders expressed some satisfaction with ongoing sales.
Construction firms reported a pronounced deterioration in business sentiment. Expectations fell to their lowest level since March 2022, even as the assessment of the current situation remained relatively positive.
