German firms expect business conditions to worsen in 2026

By Bahattin Gonultas

BERLIN (AA) - German companies expect their businesses to worsen next year, despite some improvement in the country’s economic outlook, according to a recent report by Munich-based ifo Institute.

Most German firms are skeptical of the coming year, as only 14.9% of respondents to ifo’s most recent survey, published Monday, expect their business to improve next year, while 26% expect their economic situation to worsen, and some 59% expect no changes.

Skepticism is prevalent across all sectors, the survey showed. Some 26.5% of the companies surveyed in the industrial sector anticipate business to deteriorate next year, while only 18.2% believe business will improve.

Some 32.5% of retailers believe their business situation will deteriorate, while 23.2% of textile firms think the same, and only 14% of the textile firms expect improvement.

In the construction sector, 33.2% of the companies surveyed expect deterioration in their business prospects, while only 10.3% believe in improvement next year, and 56.5% reported expecting no changes in 2026.

“Companies remain very cautious — there is no spirit of optimism to be seen anywhere,” said Klaus Wohlrabe, head of surveys at ifo. “Hardly any sector is really optimistic about 2026.”

“The figures are surprising given that the (construction) sector could actually hope for the announced infrastructure package. It doesn’t yet seem to be causing any euphoria,” he added.

The German economy avoided technical recession in the third quarter of the year, after growing 0.3% in the first and contracting 0.2% in the first and second quarters, respectively, it posted no growth — or rather 0% growth — in the third quarter.

High energy costs, weak global orders, and high tariffs affected the economy, while China’s production of many products it previously bought from Germany, as well as the chip storage, led to slowdowns in the auto industry, impacting the economy.

The government promised to overcome the stagnation with a sharp rise in infrastructure and defense spending, but the positive impact of these is taking a lot longer than expected.

Germany also revised its official growth forecast for this year from 0% to upwards to 0.2% on Oct. 8, while expecting a recovery with a 1.3% growth next year and 1.4% in 2027, led by public spending.