Ifo Business Climate Index continues to fall - German economy under pressure

The ifo business climate index continues to fall and is putting pressure on the German economy. The startup scene is also feeling the effects - interest in startups and willingness to invest are falling significantly.

Munich, August 26, 2024 - The economic mood in Germany continues to deteriorate, according to the ifo Institute in Munich. The ifo Business Climate Index fell to 86.6 points in August 2024, down from 87.0 points in July. This shows that the German economy is increasingly struggling with challenges. Companies in particular are more pessimistic about both their current situation and their future expectations.

Deterioration in the manufacturing industry

The index has fallen sharply in the manufacturing sector in particular. A clear dissatisfaction with current business is evident here. Companies' expectations fell to their lowest level since February 2024. Capital goods manufacturers in particular have been hit hard and are complaining about declining order backlogs. This illustrates how tense the situation in this important economic sector currently is.

Sceptical outlook in the services sector

The business climate has also deteriorated in the services sector. Although the current situation remained stable compared to other sectors, companies are increasingly skeptical about the future. Expectations fell again in August, indicating a possible deterioration in business development in the coming months.

Trade with slight improvement

After two consecutive declines, there has been a slight improvement in the retail sector. Although expectations remain subdued, companies are slightly less pessimistic. Despite this slight improvement, retailers remain dissatisfied with current business overall, which indicates that the consumer climate remains weak.

Main construction sector stable, but no upturn

There was no change in the ifo index for the main construction sector in August. While the assessment of the current situation improved slightly, expectations for the future deteriorated somewhat. Overall, the situation in the sector remains tense, with no short-term improvement in sight.

Economic uncertainty remains high

The ifo Business Climate Index, which is based on around 9,000 company reports and is conducted by the ifo Institute - Leibniz Institute for Economic Research at the University of Munich e.V., highlights the current difficulties facing the German economy. While individual sectors such as trade are showing slight signs of recovery, the overall picture remains bleak. The poor order situation in the manufacturing industry and the pessimistic expectations in the service sector are particularly alarming.

Clemens Fuest, President of the ifo Institute, takes a critical view of the development and warns of a further deterioration in the economic situation. Overall, the declining index indicates that the German economy will face major challenges in the coming months.

Significant challenges for the start-up economy

The persistently poor economic sentiment is clearly leaving its mark on the German startup economy. Increasing uncertainty and declining business expectations are leading to a reluctance to invest and finance, which is hitting startups particularly hard. This is also reflected in the reflected in the historically low interest in start-ups, which the DIHK Report 2024 reveals. The number of start-ups has reached an all-time low, as both founders and investors are hesitant. The difficult framework conditions make it difficult for young companies to establish themselves on the market and drive innovation.