FRANKFURT –– Business confidence in Europe’s largest economy has recorded its second straight drop as managers turned more pessimistic about the coming six months.
The decrease was the third this year with September’s decline, and all three came in the final four months of 2025, an indication of persistent weakness in business morale in the world’s fourth-largest economy.
Germany’s Ifo economics institute said Wednesday that its latest survey of domestic companies produced a fall in the headline business climate index to 87.6 points – the worst result since May – from a downwardly revised 88.0 and the market expectation of 88.1.
This month’s expectations component for the coming six months eased to 89.7 points to match September’s result, which was the lowest since March. The reading undershot November’s downwardly revised mark of 90.5, which was also the estimate.
The current conditions measure of the index held at 85.6 points, below the 85.8 market forecast.
“The year is ending without any sense of optimism,” Ifo said. The thinktank reported a drop in its index for manufacturing, adding: “Almost all sectors were affected.” Commerce readings were also weaker, it warned: “Retailers were dissatisfied with Christmas sales.”
Additionally, the business climate for construction was “unchanged at a low level.”
It’s a Christmas, here's your coal
Referring to the German chancellor, ING’s Carsten Brzeski titled his comments on the news, “December Ifo index sets Friedrich Merz’s Christmas tree on fire”.
The economist went on to explain that “the dreadful economic performance” this year has at least one upside, with people finally understanding that Germany’s economic problems were more than a series of unfortunate circumstances. They resulted from “years of underinvestment, a lack of structural reforms and the rise of China from export destination to system rival. US tariffs and the stronger euro exchange have only aggravated the problems but are not the root cause.”
The outlook for Germany has improved, but issues remain, Brzeski warned. “There is sufficient evidence to suggest that the German economy will leave stagnation behind next year, even though any cyclical rebound should definitely not be mistaken for a structural improvement.”
Source: Ifo
Poll results follow weaker PMIs
Purchasing managers in Germany were also more pessimistic than anticipated this month. S&P Global said Tuesday that its preliminary composite reading for December showed an unexpected decline to 51.5 points – a 4-month low – from 52.4 in November. The manufacturing reading slid half a point to 47.7, a 10-month low and even further away from growth territory beyond the 50-point mark. Services dropped a half point to a 3-month low of 52.6.
This month’s soured mood among managers comes despite Berlin’s plans to spend up to a trillion euros or more on its military, domestic infrastructure, and climate protection in the coming years.
Recent media reports said German parliament is on the verge of approving a EUR 52 bn package for defence spending, news that likely helped bolster a forward-looking measure of local investor confidence, which rose unexpectedly this month.
But with European Central Bank interest rates likely headed for a hold Thursday – and possibly for all of next year, according to some analysts – German managers are unlikely to receive any relief on borrowing costs.
And the outlook for Germany took another hit late in the year: the OECD cut its 2026 GDP growth forecast to 1.0% from 1.1% in September. Its June estimate was 1.2%.
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- Headline measure falls to lowest mark since May
- Ifo: Year ends “without any sense of optimism”
- Retailers dissatisfied with Christmas sales
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
17 December 2025 | 09:50 GMT
The decrease was the third this year with September’s decline, and all three came in the final four months of 2025, an indication of persistent weakness in business morale in the world’s fourth-largest economy.
Germany’s Ifo economics institute said Wednesday that its latest survey of domestic companies produced a fall in the headline business climate index to 87.6 points – the worst result since May – from a downwardly revised 88.0 and the market expectation of 88.1.
This month’s expectations component for the coming six months eased to 89.7 points to match September’s result, which was the lowest since March. The reading undershot November’s downwardly revised mark of 90.5, which was also the estimate.
The current conditions measure of the index held at 85.6 points, below the 85.8 market forecast.
“The year is ending without any sense of optimism,” Ifo said. The thinktank reported a drop in its index for manufacturing, adding: “Almost all sectors were affected.” Commerce readings were also weaker, it warned: “Retailers were dissatisfied with Christmas sales.”
Additionally, the business climate for construction was “unchanged at a low level.”
It’s a Christmas, here's your coal
Referring to the German chancellor, ING’s Carsten Brzeski titled his comments on the news, “December Ifo index sets Friedrich Merz’s Christmas tree on fire”.
The economist went on to explain that “the dreadful economic performance” this year has at least one upside, with people finally understanding that Germany’s economic problems were more than a series of unfortunate circumstances. They resulted from “years of underinvestment, a lack of structural reforms and the rise of China from export destination to system rival. US tariffs and the stronger euro exchange have only aggravated the problems but are not the root cause.”
The outlook for Germany has improved, but issues remain, Brzeski warned. “There is sufficient evidence to suggest that the German economy will leave stagnation behind next year, even though any cyclical rebound should definitely not be mistaken for a structural improvement.”
Poll results follow weaker PMIs
Purchasing managers in Germany were also more pessimistic than anticipated this month. S&P Global said Tuesday that its preliminary composite reading for December showed an unexpected decline to 51.5 points – a 4-month low – from 52.4 in November. The manufacturing reading slid half a point to 47.7, a 10-month low and even further away from growth territory beyond the 50-point mark. Services dropped a half point to a 3-month low of 52.6.
This month’s soured mood among managers comes despite Berlin’s plans to spend up to a trillion euros or more on its military, domestic infrastructure, and climate protection in the coming years.
Recent media reports said German parliament is on the verge of approving a EUR 52 bn package for defence spending, news that likely helped bolster a forward-looking measure of local investor confidence, which rose unexpectedly this month.
But with European Central Bank interest rates likely headed for a hold Thursday – and possibly for all of next year, according to some analysts – German managers are unlikely to receive any relief on borrowing costs.
And the outlook for Germany took another hit late in the year: the OECD cut its 2026 GDP growth forecast to 1.0% from 1.1% in September. Its June estimate was 1.2%.
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