Germany’s Ifo business climate index improved modestly in May, providing signs that Europe’s largest economy may be stabilizing after months of weakness, although underlying conditions remain uneven across sectors. The business climate index rose from 84.5 to 84.9, exceeding expectations of 84.2. The current evaluation index also improved from 85.5 to 86.1, while the expectations index increased from 83.5 to 83.8, both of which were higher than market expectations.
The improvement was mainly driven by manufacturing and services. Manufacturing sentiment rose from -12.1 to -11.3 as companies benefited from easing supply disruptions and some stabilization in external demand conditions. The services sector returned to positive territory, improving from -2.6 to 0.1, suggesting that domestic activity may find a temporary foothold despite rising energy costs and broader geopolitical uncertainty. However, weakness continued elsewhere, with business sentiment deteriorating further from -21.1 to -21.9 and construction falling from -14.3 to -15.6 as higher financing costs and weak demand continue to weigh on the sector.
“The German economy is currently stabilizing, although the situation remains fragile,” the Ifo institute said. This assessment largely matches the broader picture of the eurozone currently emerging from business surveys: the sharp deterioration seen earlier this year may be slowing, but high energy prices, weak consumer demand, and uncertainty surrounding conflict in the Middle East are still preventing a more convincing recovery from taking hold.
| index | former | Latest | anticipation |
|---|---|---|---|
| Evo Business Climate | 84.5 | 84.9 | 84.2 |
| Current rating | 85.5 | 86.1 | 85.1 |
| Expectations index | 83.5 | 83.8 | 83.5 |
Sector collapse
| sector | former | Latest |
|---|---|---|
| manufacturing | -12.1 | -11.3 |
| Services | -2.6 | 0.1 |
| commerce | -21.1 | -21.9 |
| building | -14.3 | -15.6 |
