German business confidence has taken another hit in November, falling more than analysts anticipated as companies express growing skepticism about the government's ability to revive the struggling economy.
Business Sentiment Worsens
The latest survey from the Ifo institute revealed that business morale dropped to 88.1 points this month, down from October's reading of 88.4 points. This decline exceeded financial analysts' expectations, who had predicted a more modest dip to 88.3 points according to FactSet data.
"Sentiment among companies in Germany has deteriorated," confirmed Ifo president Clemens Fuest. "They have little faith that a recovery is coming anytime soon." This marks the latest setback for Europe's largest economy, which has been grappling with recession conditions for two consecutive years.
Failed Reform Promises
The disappointing figures come despite Chancellor Friedrich Merz's earlier promises of comprehensive economic reforms. Earlier this year, Merz committed to a series of measures including significant public spending initiatives designed to jumpstart Germany's economy after suffering from industrial decline and weak consumer demand.
However, implementation has stalled due to multiple factors including political disagreements, bureaucratic delays, and insufficient focus on fundamental structural reforms. Jens Oliver-Niklasch, an economist at LBBW bank, described the situation as alarming, particularly noting the sharp decline in companies' future expectations.
"We have not moved forward since the summer," Oliver-Niklasch stated, adding that the chancellor's promised "autumn of reforms" has failed to materialize as anticipated.
Sector-Specific Impacts
The manufacturing sector experienced particularly heavy blows in the latest survey, with companies reporting diminished order books and pessimistic outlooks for the coming months. Morale also declined in both the trade and construction sectors, indicating broad-based economic concerns across multiple industries.
One bright spot emerged in the service sector, where business confidence actually improved during the same period. This divergence suggests that Germany's economic challenges are affecting different parts of the economy unevenly.
Despite the current pessimism, some economists maintain a cautiously optimistic view. Dirk Schumacher, chief economist at German public lender KfW, noted that corporate expectations have generally trended upward throughout the year.
"As the days soon become longer again, growth is likely to return," Schumacher predicted. "We expect a noticeable increase in gross domestic product in 2026, driven primarily by fiscal stimulus."
The German government currently forecasts economic growth of 0.2 percent for this year, with a more substantial expansion of 1.3 percent anticipated for 2026 as stimulus measures take effect.
