German Business Confidence Set To Rise Despite Domestic Drag
- Business confidence expected to improve
- Manufacturing provides supporting evidence
- Positive signals may reach ifo with a lag
- Cautious optimism despite persistent headwinds
- Data due at 10:00 AM CEST/ 08:00 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
11:00 CST | 24 August 2026
The ifo index is expected to extend its recovery, supported by defence and AI investment even as consumption and exports remain weak.
The latest consensus forecast expects the business climate index to rise to 87.2 in August from 86.6 in July. The current assessment index is forecast to edge up to 87.0 from 86.5, while the expectations index is seen climbing to 87.5 from 86.7.
Commenting on last month’s third consecutive improvement in the headline index, Carsten Brzeski, global head of macro at ING, observed that growing optimism among German businesses and increased hopes of an economic rebound in the second half of the year would ordinarily be cause for celebration.
“However, in this highly volatile geopolitical environment, even leading indicators have become rather outdated.
“As concerning as the latest developments are for the short-term outlook, the longer-term outlook for the German economy will still be driven by fiscal stimulus and the investments in defence and infrastructure, as well as the ability to translate recent reform plans into real and tangible action.”
Experts also point to the warm, dry summer weather, which has left water levels in major transportation waterways at record lows, potentially affecting industrial supply chains and construction activity.
Supporting evidence
On Friday, S&P Global's latest HCOB flash Germany Composite PMI Output Index slipped to 51.0 in August from 51.3 in July, marking a two-month low. Within the survey, the manufacturing output index surprised on the upside, rising to 56.7 from 54.2, a 55-month high. The increase was driven by investment in defence and AI-related infrastructure, as well as stock-building -- all of which should support ifo sentiment.
The agency reported a rise in business expectations to their highest level since just before the outbreak of the Middle East conflict in February, and, in turn, moved slightly above the series' long-run average.
Société Générale said it expected the confidence index to improve further in August despite the stalemate in the Iran conflict.
“Expectations remain subdued, while the current momentum in production appears strong. Confidence in the ifo survey should continue to recover gradually, as it remains at historically low levels and may respond to the more positive PMIs with a lag.”
Earlier the same morning, the government is due to release its final estimate of second-quarter GDP growth, which is expected to confirm the previously reported rate of 0.2%.
“The first release of the expenditure components is likely to show that the contribution from net exports swung back into negative territory in the second quarter and that private consumption remained subdued, in line with weak retail sales,” analysts at Société Générale noted.
Nevertheless, corporate Germany appears to be navigating these headwinds with a cautiously upbeat view of the foreseeable future.
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- Business confidence expected to improve
- Manufacturing provides supporting evidence
- Positive signals may reach ifo with a lag
- Cautious optimism despite persistent headwinds
- Data due at 10:00 AM CEST/ 08:00 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
11:00 CST | 24 August 2026
The ifo index is expected to extend its recovery, supported by defence and AI investment even as consumption and exports remain weak.
The latest consensus forecast expects the business climate index to rise to 87.2 in August from 86.6 in July. The current assessment index is forecast to edge up to 87.0 from 86.5, while the expectations index is seen climbing to 87.5 from 86.7.
Commenting on last month’s third consecutive improvement in the headline index, Carsten Brzeski, global head of macro at ING, observed that growing optimism among German businesses and increased hopes of an economic rebound in the second half of the year would ordinarily be cause for celebration.
“However, in this highly volatile geopolitical environment, even leading indicators have become rather outdated.
“As concerning as the latest developments are for the short-term outlook, the longer-term outlook for the German economy will still be driven by fiscal stimulus and the investments in defence and infrastructure, as well as the ability to translate recent reform plans into real and tangible action.”
Experts also point to the warm, dry summer weather, which has left water levels in major transportation waterways at record lows, potentially affecting industrial supply chains and construction activity.
On Friday, S&P Global's latest HCOB flash Germany Composite PMI Output Index slipped to 51.0 in August from 51.3 in July, marking a two-month low. Within the survey, the manufacturing output index surprised on the upside, rising to 56.7 from 54.2, a 55-month high. The increase was driven by investment in defence and AI-related infrastructure, as well as stock-building -- all of which should support ifo sentiment.
The agency reported a rise in business expectations to their highest level since just before the outbreak of the Middle East conflict in February, and, in turn, moved slightly above the series' long-run average.
Société Générale said it expected the confidence index to improve further in August despite the stalemate in the Iran conflict.
“Expectations remain subdued, while the current momentum in production appears strong. Confidence in the ifo survey should continue to recover gradually, as it remains at historically low levels and may respond to the more positive PMIs with a lag.”
Earlier the same morning, the government is due to release its final estimate of second-quarter GDP growth, which is expected to confirm the previously reported rate of 0.2%.
“The first release of the expenditure components is likely to show that the contribution from net exports swung back into negative territory in the second quarter and that private consumption remained subdued, in line with weak retail sales,” analysts at Société Générale noted.
Nevertheless, corporate Germany appears to be navigating these headwinds with a cautiously upbeat view of the foreseeable future.