IFO’s Business climateAn unevenly distributed rebound in business sentiment. The industrial recession ended in Q4 2025. Production rebounded, driven by capital goods, as did demand (new industrial orders). However, the business climate remains mixed, as it is higher than at the end of 2024, but did decline at the end of 2025. The impact of US customs tariffs and Chinese competition fueled the recession in some sectors (most notably, chemicals and metallurgy), while the automotive industry benefitted from the rebound in new car registrations in Germany. Services are in a better shape, with the PMI in expansion territory for four months.
Household confidenceHousehold confidence ended 2025 at its lowest level of the year (-26.9), weighed down by weaker income expectations (slowing wage growth and fears about future pension reform) and a sharp increase in the propensity to save. However, the anticipated slowdown in inflation and the increase in the minimum wage should provide support in the coming months.
