German companies feel pessimistic about the new year, with only 12.6% expecting business conditions to improve in 2025, according to a poll by the Ifo institute of some 8,000 firms published on Monday.
"No sector is really optimistic about 2025. A lot of work awaits the new German government," says Klaus Wohlrabe, head of surveys at Ifo. "In view of the fact that the economy has already performed poorly in 2024, these figures are worrying," Wohlrabe added.
The construction industry was most pessimistic, with less than 5% of companies expecting an upturn next year, while 15.7% of companies in the country's large manufacturing sector expected business conditions to improve next year.
In the chemicals industry, the nation's third-largest sector, 18.2% of businesses expected an upswing in 2025.
Beset with weak global demand, high costs and an industrial slowdown, Europe's biggest economy is on track to shrink for a second year running in 2024, with economic institutes forecasting another difficult year in 2025.
Business Activity Contracts
Elsewhere, Germany's economic downturn eased slightly in December but business activity still contracted for a sixth month running, according to a survey published on Monday.
The HCOB German flash composite Purchasing Managers' Index, compiled by S&P Global, rose to 47.8 from 47.2 in November, but remained in contraction territory. Analysts polled by Reuters had forecast a reading of 47.8.
The business activity index for Germany's services sector rose to 51.0 in December from 49.3 in November, beating the forecast of 49.4. Any reading above 50 indicates expansion.
"This improvement in services is a good counterbalance to the quicker decline in manufacturing output, giving some hope that GDP might not have shrunk in the last quarter of the year," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Germany dodged a technical recession in the third quarter but the government expects output to contract by 0.2% in 2024 as a whole, making Germany a laggard among leading world economies.
The German economy has been dogged by intensifying competition from abroad, weak demand and an industrial slowdown. To boot, a budget row brought down the country's three-way coalition and has left Europe's largest economy in political limbo until snap elections in February.
