German business sentiment flat as 2026 starts 'with little momentum'

Sentiment among German businesses failed to improve at the start of the year as forecasts on economic recovery this year remain subdued, according to a survey by a leading think thank published on Monday.

The closely-watched monthly business climate index of the Munich-based ifo Institute remained unchanged at 87.6 points in January. Analysts had expected an increase to 88.2 points.

While businesses were slightly more optimistic regarding the current situation, expectations deteriorated slightly.

"The German economy is starting the new year with little momentum," ifo head Clemens Fuest said in a statement.

Ifo surveys some 9,000 for the index each month in what is considered the most important indicator of economic growth in Germany.

Commerzbank chief economist Jörg Krämer noted that the index had been expected to increase after declining for two consecutive months.

"The fact that this did not happen is disappointing," he said, attributing the development to the fact that many companies are disappointed by the lack of broad-based reforms. "The economy is likely to recover only hesitantly this year," he added.

Following two consecutive years of recession in 2023 and 2024, the German economy only grew marginally in 2025, with gross domestic product rising by 0.2%, according to preliminary figures.

Germany's central bank estimates that the slow pace of growth will continue in the first quarter of 2026, with economists forecasting 1% growth for the year as whole.