German business confidence was unchanged in February at weak levels as Europe’s top economy struggles, a survey showed Monday, highlighting the challenges for the country’s next government.
The Ifo institute’s confidence barometer was 85.2 in February, unchanged from January and only slightly above the level in December.
December’s reading was the worst since May 2020, when Germany was dealing with the impact of Covid pandemic shutdowns.
“Sentiment among companies in Germany continues to be sceptical,” said Ifo president Clemens Fuest.
“The German economy is waiting to see how things develop.”
The downcast mood reflects the problems of Germany’s economy, which has shrunk for the past two years as it deals with fierce Chinese competition in key sectors such as cars as well as high energy costs.
Manufacturers’ views of the current climate further deteriorated, Fuest said, although their outlook on the future improved slightly.
Overall, confidence levels in the manufacturing, trade and service sectors are currently at “crisis” levels, the institute said, with confidence in the construction sector slightly better.
Germany held snap elections Sunday, with the conservatives led by Friedrich Merz coming out on top.
Carsten Brzeski, economist at Dutch bank ING, said the index underlined the challenges facing Germany’s next government.
“The Ifo index suggests that the German economy is still in stagnation,” he said.
“All eyes will now be on the upcoming coalition talks, hoping for some breakthrough and at least a confidence boost.”
Merz’s Christian Democrats (CDU), who have promised to cut taxes and regulation, are set to enter potentially lengthy talks to build a coalition.
The new government will face calls for reforms such as easing Germany’s “debt brake”, which limits borrowing and has been blamed for holding back investment, but such steps could be tough to push through parliament.
The Ifo institute surveys around 9,000 companies for their Business Climate Index. A reading of 100 points equates to confidence-levels registered in 2015.