Ifo Business Climate Rises for the Third Consecutive Month in July

Clemens Fuest, President of the Ifo Institute, viewed the development positively. „Trotz der unsicheren Lage am Persischen Golf zeigt sich die deutsche Wirtschaft weniger pessimistisch“, he said. Fuest sees the increase as a signal that the economy is gaining stability, even if the underlying conditions remain difficult.

Sector Picture: Industry and Trade Gain, Chemicals Brakes

Sentiment improved in all sectors: industry, services, trade, and construction. The mood brightened particularly noticeably in the executive suites of German industrial companies. Many firms in the automotive and mechanical engineering sectors reported stronger demand.

The chemical industry was an exception. There, pessimism increased, „mutmaßlich getrieben von steigenden Ölpreisen“, as Ifo survey chief Klaus Wohlrabe emphasized. Assessments of the current situation in the manufacturing sector and the services sector were also somewhat weaker.

Wohlrabe characterized the July figure as a „Lichtblick in dieser schwierigen Gemengelage“. „Die deutsche Wirtschaft ist bereit, Schwung aufzunehmen. Für die Gesamtwirtschaft zeichnet sich ein leichter Aufwärtstrend ab“, he said. At the same time, he warned: „Von Optimismus sei die deutsche Wirtschaft noch ein Stück weit entfernt“.

Price Expectations and Uncertainty Rise

Uncertainty remains a central theme. „Viele Unternehmen sind auf Preiserhöhungen gewechselt. Auch hat die Unsicherheit wieder zugenommen, und zwar branchenübergreifend“, Wohlrabe explained. Price expectations across the economy as a whole rose. This indicates that companies are increasingly passing on higher costs to their customers.

Sentiment in trade also brightened; retail in particular saw companies become less pessimistic. The indicator also rose in the main construction sector because fewer construction firms complained of a lack of orders. The improvement thus extended across several sectors.

Commerzbank Economist Qualifies the Significance

Jörg Krämer, chief economist at Commerzbank, qualified the significance of the increase. „Der deutliche Anstieg des Ifo-Geschäftsklimas ist nur bedingt aussagefähig, weil die meisten Unternehmen die Umfrage vor dem massiven Ölpreisanstieg der beiden letzten Wochen beantwortet haben“, he said. „Aber zumindest zeigt der Anstieg, welches Erholungspotential vorhanden ist, falls sich die USA und der Iran einigten und die Straße von Hormus dauerhaft geöffnet würde."

The background is the situation in the Persian Gulf: a barrel of the Brent reference grade had temporarily cost more than 100 dollars again. The transport of oil, gas, and raw materials through the Strait of Hormuz is still far from running as it did before the Iran war. Analysts pointed out, however, that the questionnaires had been sent out before the renewed flare-up of the Iran war and under the impression of the negotiations that were still ongoing at the time.

Geopolitical Risks: Oil Price and Strait of Hormuz

Marc Schattenberg, economist at Deutsche Bank, sees both positive and risk-laden signals. „Vor allem die jüngsten Reformbeschlüsse der Bundesregierung dürften den Optimismus vieler Unternehmen gestärkt haben“, he said. At the same time, he warned: „Die jüngste Eskalation im Persischen Golf und der damit verbundene erneute Anstieg der Öl- und Gaspreise dürften hier belastet haben und bleiben auch für die kommenden Monate ein Risiko." The slight deterioration in the current-assessment indicator is „ein Wermutstropfen".

Alexander Krüger, chief economist at Bethmann Hal, was likewise cautious: „Die Laune der Unternehmen dürfte erst dann besser werden, wenn die Energiepreise deutlich fallen. Solange das nicht geschieht, wird die Stimmung wohl einem Auf und Ab folgen." Krämer also expects that the German economy will continue to suffer from high energy prices in the second half of the year, because the path to an agreement will be „lang und holprig".

Methodology: ifo Survey of 9,000 Companies

The monthly ifo survey is based on the responses of around 9,000 companies in Germany and is regarded as one of the most important leading indicators for the economy. The institute publishes the results regularly at the end of each month; the July data were released on Monday in Munich.

The report was broadcast on 27.07.2026 on the Deutschlandfunk program and distributed via the dpa-AFX news service. Economic researchers and macroeconomists will scrutinize the upcoming data series closely to see whether the July increase holds or whether the renewed rise in oil prices will dampen the recovery again. The next ifo data will show how strongly the geopolitical pressure on the German economy actually cuts through.