Saturday, 15 March 2025
The economic barometer of the German Institute for Economic Research (DIW Berlin) showed a modest increase at the start of the year, rising 1.3 points to 87.7 in January. However, the index remains well below the neutral 100-point mark, signaling continued economic weakness.
Slow Recovery Amid Uncertainty
“The German economy is progressing in small steps but remains in wait-and-see mode,” said Geraldine Dany-Knedlik, DIW’s Director of Economic Research. With parliamentary elections approaching, political uncertainty is discouraging investment. Meanwhile, foreign trade risks, exacerbated by ongoing trade conflicts and geopolitical tensions, pose additional challenges for export-dependent industries. A stable government post-election could offer new economic momentum, providing a much-needed boost.
Industrial Sector Under Pressure
The manufacturing sector continues to struggle. While there was a marginal improvement in orders and a brief uptick in production, DIW experts warn that this may be temporary, driven by companies rushing to fulfill orders before potential tariff increases. “German industry remains under strain from global trade risks and weak domestic demand,” noted Laura Pagenhardt, a DIW economic analyst. Business expectations for the coming months have deteriorated again, signaling no clear recovery trend.
Services Sector Shows Resilience
The services sector has performed slightly better, with improved business sentiment and employment expectations. However, retail sales continue to decline, suggesting consumer spending remains weak despite a slight rise in consumer confidence. The labour market remains divided, with job losses in manufacturing but some stabilization in services.
Outlook: Stability Needed for Growth
“The small uptick in the economic barometer suggests the economy may have hit bottom,” said Guido Baldi, DIW economic expert. “But geo-economic fragmentation and uncertainty surrounding the new U.S. administration remain major concerns. A stable post-election government must provide clear policies on the economy, energy, and infrastructure to restore business confidence and investment.”
Source: DIW
