Eastern Germany's business environment sees a modest improvement in July 2025
The ifo Institute, a renowned economic research organisation, released a report on the business climate in Eastern Germany on 31 July 2025. The report revealed that the expectations of service companies in the region for the coming months were slightly more optimistic, while industrial companies assessed their current business situation much better in June.
The manufacturing sector experienced a significant improvement in June, with the business climate index rising markedly. Companies reported better evaluations of current conditions and more optimistic future expectations. This trend continued in July, with the sector showing further improvement.
The construction sector experienced one of the most pronounced improvements, with the business climate index rising markedly (+5.5 points to -17.2 points). Both current conditions and future expectations became more optimistic, reflecting a notably brighter outlook. Eastern German construction companies raised their business expectations noticeably in July compared to the previous month.
However, the retail trade sector faced setbacks in June, with significantly worse performance and a more negative outlook. Despite this, companies in the wholesale trade sector assessed their current situation slightly better in June and raised their expectations for future business slightly.
The service sector experienced a slight dip in business sentiment, with current evaluations less favorable. However, expectations for the coming months showed a mild improvement, indicating cautious optimism despite near-term challenges.
Quantitatively, the overall business climate index for Eastern Germany rose from 88.4 in June to 88.8 in July 2025, indicating a general brightening of business sentiment in the region. The business climate in the Eastern German construction sector improved more than the business climate in the service sector in July. It also improved more than the business climate in the trade sector.
In sum, the manufacturing and construction sectors showed the strongest improvement, with more optimism about the near future, while the retail trade faced setbacks, and the service sector’s outlook became cautiously optimistic despite a current dip. Wholesale trade experienced slight gains, softening the overall trade sector decline.
Joachim Ragnitz and Marcel Thum, the Managing Directors of the ifo Institute's Branch Office Dresden, oversaw the compilation of the report. The report provides a comprehensive analysis of the current business climate in Eastern Germany and offers valuable insights for policymakers and businesses alike.
[1] ifo Institute (2025). Business Climate in Eastern Germany: July 2025. [online] Available at: https://www.ifo.de/en/news-and-research/news/business-climate-in-eastern-germany-july-2025/ [Accessed 1 August 2025].
[2] ifo Institute (2025). Business Climate in Eastern Germany: June 2025. [online] Available at: https://www.ifo.de/en/news-and-research/news/business-climate-in-eastern-germany-june-2025/ [Accessed 1 August 2025].
[3] ifo Institute (2025). ifo Business Climate Index for Eastern Germany: July 2025. [online] Available at: https://www.ifo.de/en/news-and-research/news/ifo-business-climate-index-for-eastern-germany-july-2025/ [Accessed 1 August 2025].
[4] ifo Institute (2025). ifo Business Climate Index for Eastern Germany: June 2025. [online] Available at: https://www.ifo.de/en/news-and-research/news/ifo-business-climate-index-for-eastern-germany-june-2025/ [Accessed 1 August 2025].
[5] ifo Institute (2025). ifo Business Climate Index for Eastern Germany: July 2025. [online] Available at: https://www.ifo.de/en/news-and-research/news/ifo-business-climate-index-for-eastern-germany-july-2025/ [Accessed 1 August 2025].
- In the context of the ifo Institute's report, the manufacturing and construction sectors in Eastern Germany have shown notable improvements, with optimistic expectations for future business due to better evaluations of current conditions.
- Within the economic analysis provided by the ifo Institute, the financial sector's role in supporting businesses in the manufacturing and other industries was not explicitly mentioned, suggesting a potential area for further research to understand its impact on the overall business climate in Eastern Germany.
