FRANKFURT –– Business confidence in Europe’s largest economy has held at its lowest rate since the spring of last year as the US and Europe continue to wrestle with transatlantic trade policy.
Germany’s Ifo economics institute said Monday that its latest survey of domestic companies produced a repeat of December’s headline business climate index of 87.6 points, the worst result since May and short of the market estimate of 88.2.
This month’s expectations component for the coming six months eased for the third straight month with a two-tenth decline to 89.7 points, undershooting the forecast of 90.2.
The current conditions measure of the index improved a tenth to 85.7 points, missing the market estimate of 86.0.
“The German economy is starting the new year with little momentum,” Ifo said.
The institute noted that its indices for manufacturing, trade, and construction improved, with the services reading in decline.
The opinions of purchasing managers in Germany this month were more optimistic, but less enthusiastic than expected. S&P Global said Friday that its preliminary composite reading for January climbed to 52.5 points, which beat the estimate and pushed the overall measure further into growth territory above 50. The services reading increased to 53.3 –short of the forecast– while the manufacturing component improved to 48.7 from 47.0 in December. All three readings were at three-month highs.
EUR/USD remained above 1.18 in early European trading.
Trade in the spotlight
Issues with transatlantic tariffs are still not settled – the EU parliament stopped deliberations on approving Brussels’ deal with the US following President Donald Trump’s failed attempts to strong arm the trading bloc into surrendering Greenland.
And US levies appear to be holding back at least one investment: Volkswagen chairman Oliver Blum told German business daily Handelsblatt that at current levels, additional major investments such as the construction of a US factory to produce its Audi-badged models are “unfinanceable” due to Washington’s import tariffs, which are applied to German cars and parts.
Additionally, while Brussels and the US were wrestling over trade, the EU Parliament sent the Mercosur trade agreement – the result of a quarter-century of talks – to a judicial review that could take up to two years or more. A number of European leaders have called for the deal to be enacted provisionally, but German business leaders are unlikely jumping for joy about the situation. The initial response to deal pushed one investor confidence measure to its highest mark since July 2021.
Conversely, many of them can be hopeful about Berlin’s plans to spend hundreds of billions of euros in the coming years on domestic infrastructure and defence.
“Despite this morning's disappointing Ifo index reading, there are good reasons to be more positive about the German economy,” ING’s Carsten Brzeski said in a note. “The latest macro data indicates a clear turning point in industry at the end of last year. Industrial orders have now increased for three consecutive months, and even the argument that bulk orders drove the November surge does not really concern us; with the fiscal spending programme, more of these bulk orders will come this year. In fact, bulk orders could be the new normal, not the exception.”
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var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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- Headline measure stays at lowest mark since May
- Ifo: Year starts with “little momentum”
- Tariffs could cancel Audi factory in US – VW chairman
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
26 January 2026 | 09:50 GMT
FRANKFURT –– Business confidence in Europe’s largest economy has held at its lowest rate since the spring of last year as the US and Europe continue to wrestle with transatlantic trade policy.
This month’s expectations component for the coming six months eased for the third straight month with a two-tenth decline to 89.7 points, undershooting the forecast of 90.2.
The current conditions measure of the index improved a tenth to 85.7 points, missing the market estimate of 86.0.
“The German economy is starting the new year with little momentum,” Ifo said.
The institute noted that its indices for manufacturing, trade, and construction improved, with the services reading in decline.
The opinions of purchasing managers in Germany this month were more optimistic, but less enthusiastic than expected. S&P Global said Friday that its preliminary composite reading for January climbed to 52.5 points, which beat the estimate and pushed the overall measure further into growth territory above 50. The services reading increased to 53.3 –short of the forecast– while the manufacturing component improved to 48.7 from 47.0 in December. All three readings were at three-month highs.
EUR/USD remained above 1.18 in early European trading.
Trade in the spotlight
Issues with transatlantic tariffs are still not settled – the EU parliament stopped deliberations on approving Brussels’ deal with the US following President Donald Trump’s failed attempts to strong arm the trading bloc into surrendering Greenland.
And US levies appear to be holding back at least one investment: Volkswagen chairman Oliver Blum told German business daily Handelsblatt that at current levels, additional major investments such as the construction of a US factory to produce its Audi-badged models are “unfinanceable” due to Washington’s import tariffs, which are applied to German cars and parts.
Additionally, while Brussels and the US were wrestling over trade, the EU Parliament sent the Mercosur trade agreement – the result of a quarter-century of talks – to a judicial review that could take up to two years or more. A number of European leaders have called for the deal to be enacted provisionally, but German business leaders are unlikely jumping for joy about the situation. The initial response to deal pushed one investor confidence measure to its highest mark since July 2021.
Conversely, many of them can be hopeful about Berlin’s plans to spend hundreds of billions of euros in the coming years on domestic infrastructure and defence.
“Despite this morning's disappointing Ifo index reading, there are good reasons to be more positive about the German economy,” ING’s Carsten Brzeski said in a note. “The latest macro data indicates a clear turning point in industry at the end of last year. Industrial orders have now increased for three consecutive months, and even the argument that bulk orders drove the November surge does not really concern us; with the fiscal spending programme, more of these bulk orders will come this year. In fact, bulk orders could be the new normal, not the exception.”
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