“Confidence among German firms was flat in January, with sentiment failing to pick up steam despite the rollout of government stimulus.
The Munich-based Ifo Institute said on Monday that its business-climate index, based on about 9,000 monthly responses from businesses, remained unchanged at 87.6 this month, missing a consensus of economists polled by The Wall Street Journal that expected a rise to 88.0. "The German economy is starting the new year with little momentum," said Clemens Fuest, president of the Ifo Institute.
Sentiment picked up early last year after the government, run by Merz, pledged up to roughly $1 trillion in investment for the infrastructure and defense sectors.
But confidence stalled after the summer, as higher U.S. tariffs began to bite and concerns grew about the speed at which stimulus would be rolled out.
"The unchanged Ifo index reflects the uncertainty that has hit the German economy again on the back of geopolitical tensions and tariff threats," Carsten Brzeski at ING said.
Confidence likely took an additional hit in January after President Trump threatened to impose extra tariffs on several European countries, including Germany, for not agreeing on a deal for the U.S. to "acquire" Greenland.
The Ifo reading should therefore be taken with a pinch of salt, Brzeski said. It is unclear whether most of those surveyed responded before Trump withdrew additional tariff threats, he said.
The business climate improved sharply in the manufacturing sector, but deteriorated in the services sector.” [1]
1. World News: German Business Sentiment Flattens. Don Nico Forbes. Wall Street Journal, Eastern edition; New York, N.Y.. 27 Jan 2026: A8.
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