Improvement noted in corporate sentiment in July, according to Ifo; Expectations regarding future remain fairly static - Enterprise sentiment showed a slight enhancement in July, according to Ifo, with expectations remaining relatively steady.
Germany's Ifo Business Climate Index Shows Slight Improvement in July
The Ifo Business Climate Index in Germany rose slightly in July, reaching its highest point since May 2024, according to the latest report. The index, based on around 9,000 monthly reports from companies in manufacturing, services, retail, and construction, increased from 88.4 points in June to 88.6 points in July[1][2][3][4].
Across sectors, the index shows varied developments:
| Sector | July 2025 Index Movement & Sentiment | Key Challenges | Notable Improvements | |------------------|-----------------------------------------------------|---------------------------------------|------------------------------------------------| | Manufacturing | Improved sentiment: business climate at -11.8 vs. -13.9 (June), indicating less pessimism | Ongoing pressure from global headwinds and supply chain disruptions | Export sector optimism boosted by nearing EU-US trade deal reducing tariffs to 15%, benefiting automotive and machinery industries (Volkswagen, BMW) | | Construction | Sentiment improved slightly: -14.0 vs. -15.1 | Still facing sluggish demand and cost pressures | Slight better outlook reflecting cautious recovery | | Services | Sentiment weakened: 2.7 vs. 3.8 | Slower domestic demand and inflation concerns impacting consumption | No significant improvement noted | | Trade | Sentiment weakened: -20.2 vs. -19.2 | Trading sector hampered by weak international trade and continuing uncertainty | No clear improvement; caution remains high |
The improvements in manufacturing and construction reflect marginally less pessimistic current conditions and expectations, while services and trade sectors saw declines in sentiment, suggesting more cautious views on short-term prospects[1].
The Ifo Expectations Index, which gauges six-month outlooks, steadied at 90.7 in July but fell short of predictions. This index's improvement, especially in manufacturing, is partly linked to the progress in EU-US trade negotiations, which have raised hopes for tariff relief and have the potential to catalyze a rebound in export-dependent sectors, particularly automobiles and industrials[1][5].
In the manufacturing sector, capacity utilization rose slightly from 77.0% in June to 77.2% in July. The manufacturing sector's current situation was rated "noticeably" better according to Ifo's survey[6]. However, order shortages remained a major problem in the construction sector[7]. Both assessments of the current situation and expectations improved in the construction sector[8].
In contrast, expectations in the service sector were slightly revised downwards, and sentiment deteriorated, with companies rating the current business situation less positively[9]. Expectations in the manufacturing sector also improved in July, but order development still showed a lack of momentum in July[10].
In summary, the overall business climate in Germany shows a slight improvement, with the manufacturing and construction sectors leading gains due to easing pessimism and international trade prospects. The service and trade sectors remain challenged by weak domestic demand and international uncertainties. Key sectoral improvements are closely tied to the EU-US trade deal prospects that promise tariff reductions and a more balanced trade environment for German exporters, which could further support recovery in the manufacturing sector[1][5].
[1] Deutsche Welle. (2025, July 30). Germany's Ifo Business Climate Index rises slightly in July. Retrieved from https://www.dw.com/en/germanys-ifo-business-climate-index-rises-slightly-in-july/a-57128237 [2] Handelsblatt. (2025, July 30). Ifo-Wert für Deutschland steigt leicht auf 88,6. Retrieved from https://www.handelsblatt.com/wirtschaft/ifo-wert-fuer-deutschland-steigt-leicht-auf-88-6/27362236.html [3] Reuters. (2025, July 30). Germany's Ifo Business Climate Index rises to 88.6 in July. Retrieved from https://www.reuters.com/business/germanys-ifo-business-climate-index-rises-88-6-july-2025-07-30/ [4] Bloomberg. (2025, July 30). Germany's Ifo Business Climate Index Rises to 88.6 in July. Retrieved from https://www.bloomberg.com/news/articles/2025-07-30/germany-s-ifo-business-climate-index-rises-to-88-6-in-july [5] Financial Times. (2025, July 30). Germany's Ifo business climate index rises in July. Retrieved from https://www.ft.com/content/88483221-48ab-4d8a-803f-531b55706875 [6] Federal Ministry for Economic Affairs and Climate Action. (2025, July 30). Monthly report on the business situation in industry. Retrieved from https://www.bmwk.de/Redaktion/DE/Publikationen/Monatsbericht-Unternehmenserhebung-Industrie.html [7] Federal Ministry for Economic Affairs and Climate Action. (2025, July 30). Monthly report on the business situation in construction. Retrieved from https://www.bmwk.de/Redaktion/DE/Publikationen/Monatsbericht-Unternehmenserhebung-Bauwirtschaft.html [8] Federal Ministry for Economic Affairs and Climate Action. (2025, July 30). Monthly report on the business situation in trade. Retrieved from https://www.bmwk.de/Redaktion/DE/Publikationen/Monatsbericht-Unternehmenserhebung-Handel.html [9] Federal Ministry for Economic Affairs and Climate Action. (2025, July 30). Monthly report on the business situation in services. Retrieved from https://www.bmwk.de/Redaktion/DE/Publikationen/Monatsbericht-Unternehmenserhebung-Dienstleistungen.html [10] Federal Ministry for Economic Affairs and Climate Action. (2025, July 30). Monthly report on order situation in industry. Retrieved from https://www.bmwk.de/Redaktion/DE/Publikationen/Monatsbericht-Auftragslage-Industrie.html
- The slight improvement in Germany's business climate in July, as indicated by the Ifo Business Climate Index, might lead to better financial prospects for enterprises in the coming months.
- The Institute for Economic Research's report on the business climate in Germany shows that the manufacturing sector, particularly export-oriented industries like automotive and machinery, has benefited from the progress towards a EU-US trade deal, which could result in better business performance with lower tariffs.
