The German business sentiment index fell more than expected in November, a key survey showed on Monday, amid political uncertainty following the collapse of the country's coalition government and Donald Trump's U.S. election win.
The mood and outlook among German business leaders deteriorated again in November, according to the latest survey by the ifo Institute economic think tank, erasing a mild recovery in October.
The ifo Business Climate Index, which is based on a survey of roughly 9,000 companies across the country, dipped by 0.8 points to 85.7 points, the institute announced.
Analysts surveyed by financial data firm FactSet had forecast a more modest fall to 86.0.
The survey comes as Germany heads for new polls in February following the collapse of Chancellor Olaf Scholz's coalition and with businesses facing the threat of higher tariffs on exports to the key U.S. market once Trump returns as president.
Philipp Scheuermeyer, economist at public lender KfW, said it was "no wonder" that the index had fallen.
"Donald Trump's election victory is likely to create new headwinds for the already hard-hit German export industry," he said.
"There is also the threat of a prolonged period until a new government is formed, during which German politics will hardly be able to react, let alone provide any stimulus."
The index had ticked up for the first time in months in October, a rare piece of good news for the German economy, which has been battling a manufacturing slowdown and weak demand for a prolonged period.
The index, a closely watched economic indicator in Germany, is now approaching the low for 2024, set in September at 85.4 points.
Analysts had expected a dip after other indicators had recently been weak. On average, however, they had only expected the Ifo index to fall to 86 points.
The approximately 9,000 companies surveyed by the Ifo Institute expressed particular dissatisfaction with current conditions. The index's assessment of future business outlook dipped only slightly.
It said that companies in the crucial manufacturing sector were more pessimistic about the months ahead, although they viewed their current business situation as slightly better.
The picture in both the service sector and construction industry worsened significantly, according to the survey.
The index ticked up in the area of trade, although ifo President Clemens Fuest stressed that "sentiment among companies is still a long way off from being positive."
"The German economy is floundering," Fuest said in a news release announcing the results.
Germany was the only major advanced economy to shrink in 2023 and is on course to contract again this year.
Last week, data showed the economy expanded just 0.1% in the third quarter and only narrowly dodged a recession.
