DIW, ifo Institute and IAB see a slight recovery, but no reason to sound the all-clear

The economic barometer of the German Institute for Economic Research (https://www.diw.de) (DIW) rose slightly further in January to 94.8 points. By way of comparison, the figure was 93.4 points in December. The neutral 100-point mark indicates average economic growth. However, economists emphasise that there is no reason to sound the all-clear just yet.

‘Too many obstacles’

‘The investment measures are beginning to take effect and are giving the domestic economy a fresh boost. However, the upturn remains fragile for the time being – there are still too many obstacles,’ said DIW Chief Economist Geraldine Dany-Knedlik. Additional reform efforts by the federal government, which are intended to benefit the economy, are mostly progressing slowly.

Although global trade as a whole remains surprisingly robust despite tariff turmoil, growth rates are likely to be only moderate in the current year. Exports will continue to suffer from massive competition from China. The mood among companies and households in Germany is therefore likely to improve only gradually.

Job cuts continue

The ifo Institute (https://www.ifo.de) is also expressing cautious optimism. Companies in Germany are less likely to plan job cuts. The employment barometer rose to 93.4 points in January, up from 91.9 points in December. ‘Job cuts are slowing down, but have not yet come to a halt,’ explains Klaus Wohlrabe, head of ifo surveys.

Because jobs are being lost mainly in industry – especially in the automotive and metal sectors – the labour market remains under pressure. According to ifo statistics, companies in the retail sector also want to manage with fewer employees. In the service sector, on the other hand, the barometer rose noticeably, while there were hardly any changes in the construction industry.

Against this backdrop, the Institute for Employment Research (https://www.iab.de) (IAB) also remains cautious. The IAB labour market barometer remained above 100 points in January for the sixth month in a row. However, the leading indicator fell minimally by 0.1 points to 100.1 points compared to the previous month. The European Labour Market Barometer (https://iab.de/en/daten/european-labour-market-barometer/) also fell by 0.1 points to 99.9 points in January, just below the neutral mark of 100.