Germany: ifo business climate (July): Inching up

Research evidence excerpt

Germany: ifo business climate (July): Inching up

Economics ● Germany

27 July 2026

Implications

We have received some encouraging survey data at the beginning of the third quarter with both, PMIs and ifo up in July. Ifo has

ticked up for three consecutive months – normally a reason to become more optimistic but at levels still well below the five-year

average this is more a story of stabilisation.

Moreover, in the current volatile geopolitical environment, the timing of data collection can skew the picture. This is best illustrated by

the monthly improvement in expectations which may have somewhat been aided by the government passing a reform package but

more likely by ongoing relief of the US and Iran signing a Memorandum of Understanding – last week’s escalation in the conflict will

mostly not have featured in the survey responses.

The decline in current conditions was a tad surprising. Low Rhine water levels have pushed up barge prices at a time when global oil

prices spiked higher again and may have played a role for the more downbeat assessment of current conditions in manufacturing. In

the flash PMIs released last week the situation in manufacturing was much brighter: The index reached its highest level since spring

2022 amid higher orders intakes and stronger output, and the print could have been even stronger if supplier delivery times, which

inversely affect the index, had not ticked up by 0.6pts on the month (Eurozone PMIs, 24 July). Meanwhile the reinstatement of fuel

duty at the beginning of the month may have played a role in the downturn in services despite the start to the summer school

holidays. We expect consumers will have felt the squeeze with the headline inflation rate inching closer to 3.0% again in July – data