Germany: Ifo survey signals tentative recovery – Commerzbank

Commerzbank’s Dr. Ralph Solveen notes that Germany’s Ifo Business Climate Index rose slightly in June, mainly on a better assessment of current conditions rather than expectations. He argues that higher energy prices likely kept second-quarter GDP flat or slightly negative, but the latest survey offers hope that the German economy will regain momentum and resume a moderate recovery in the second half of 2026.

Ifo data hint at second-half upturn

"As expected, the Ifo Business Climate Index improved in June from 85.0 to 85.6. Somewhat surprisingly, this improvement is primarily due to a more positive assessment of the current business situation, while business expectations have brightened only slightly despite the easing of tensions in the Middle East. Overall, today’s figures offer hope that the German economy – after a second quarter that is expected to be quite weak due to the burden of higher energy prices – will gradually pick up again in the second half of the year."

"However, with its rise from 85.0 to 85.6 – and the slight increase in the previous month – it has so far only recouped a small portion of the drop triggered by the Iran war. The business expectations, which rose only marginally in June as well, are primarily to blame for the continued low indicator level."

"If the ceasefire in the Middle East holds, a significant improvement in expectations can be expected for July.""

"Despite the recent slight improvement in sentiment among German companies in June, we expect that real GDP did not rise again in the second quarter but likely even contracted slightly. However, today’s figures offer hope that the German economy will gain momentum in the second half of the year and thus resume its moderate recovery, which had been interrupted by the effects of the Iran war."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)