The Ifo Institute reports a persisting chill in the economic climate of the eastern sector

The Economic Mood Swings Across Eastern Germany's Industries

The economic landscape in eastern Germany is painting a pessimistic picture, according to the ifo Institute in Dresden. The business climate index for Eastern Germany took a dive, falling from 90.1 to 88.2 points between July and August, as companies expressed less optimism about their current situation and future outlooks.

While industrial companies modernized their current economic assessment in August, their expectations for future growth dipped slightly. However, the service sector is facing a significant downturn, with worse evaluations of ongoing business activities and an even gloomier outlook for the approaching months. The trade sector maintained a steady climate, but both wholesale and retail trade showed minor improvements in anticipations.

On the flip side, the construction industry continued to harbor skepticism as the mood marginally decreased. The business assessment of their current situation worsened, and the outlook for future growth became more pessimistic. The ifo business climate for Eastern Germany is built on approximately 1,700 reports from companies, who are regularly asked about their current business situation and predictions for the next six months.

Although challenges loom in eastern Germany, it's essential to note that the business climate in The Netherlands might reveal a different scenario, as indicated by various institutions. However, data on The Netherlands is not present in the original text.

Insights

1. While specific indices for the manufacturing, service, and construction sectors aren't directly provided, we can draw inferences. Western Germany, with its gigantic service sector accounting for about 70% of the total GDP and a higher standard of living, contrasts with eastern Germany, which historically has required substantial annual transfers from western regions to foster development.
2. Although the Eurozone PMI showed marginal economic growth for February 2025, the manufacturing sector in Germany exhibited a slower rate of contraction, while the services sector showed a slight expansion, albeit slower than in previous months.
3. While the overall business climate in Germany is profoundly affected by broader economic drivers like industrial production, employment, and consumer sentiment, the ZEW Economic Sentiment Index suggests some optimism in the business sector, tempered by difficulties posed by high energy prices and decarbonization efforts, particularly for industrial sectors.