German business climate index improves amid uptick in expectations

Business sentiment in Germany improved in October, a leading economic institute said on Monday.

The ifo Institute’s business climate index rose by 0.7 points to 88.4 points, beating expectations.

While in Germany, the 9,000 companies surveyed reported a downturn in their current economic situation, their assessment of future expectations rose significantly.

“Companies remain hopeful that the economy will pick up in the coming year,” said Clemens Fuest, president of the Munich-based institute.

Germany is struggling to recover from consecutive years of recession, with gross domestic product (GDP) expected to rise minimally in 2025.

In the trade and manufacturing sectors, the monthly report found improved expectations despite a worse current economic situation.

In services, the climate improved significantly, with positive responses on both current business and forecasts.

However, the index for Germany’s construction sector declined due to pessimistic expectations. “A lack of orders remains a key problem for the industry,” said Fuest.

Germany moves to extend tax exemptions for EVs

The German Cabinet advanced several key policies, extending tax exemptions for electric vehicles and working pensioners while approving a savings package to avoid a rise in social security contributions.

The measures – which all require parliamentary approval – are part of Chancellor Friedrich Merz’s effort to revive the sluggish German economy after two consecutive years of recession.

New electric cars are to be exempt from motor vehicle tax until 2035, five years longer than previously.

“We need to set the right incentives now so that we can get many more electric cars on the road in the coming years,” said Finance Minister Lars Klingbeil in a statement.

The tax exemption is meant to assist consumers in switching to electric models and to support Germany’s crucial carmaking sector.

The Finance Ministry expects the measure to cost €50 million ($58 million) in the coming year, rising to €380 million by 2030.

Meanwhile, pensioners are poised to be able to earn €2,000 per month tax-free in retirement age if they continue to work.