BERLIN, Jan. 27 (Xinhua) -- German companies began the new year with a slight improvement in sentiment, defying expectations amid ongoing economic challenges. The ifo business climate index rose slightly to 85.1 points in January after hitting a four-year low in the previous month.

The Munich-based ifo Institute attributed the uptick to a more favorable assessment of the current business situation. However, expectations for the months ahead continued to weaken.

The monthly survey, which gathers insights from around 9,000 companies, revealed a mixed picture across sectors. Sentiment in manufacturing declined further, hitting its lowest level since May 2020, while the index for services rose significantly and that in the trade sector remained unchanged.

"The German economy continues to be pessimistic," ifo president Clemens Fuest remarked.

Europe's largest economy shrank by 0.2 percent in 2024, marking ist first back-to-back contraction since the early 2000s.

Major economic organizations and think tanks have responded by revising their forecasts downward for 2025. The International Monetary Fund recently projected that Germany's economy would grow by 0.3 percent this year, a sharp downgrade from its previous forecast of 0.8 percent.

Carsten Brzeski, the global head of macro at ING Research, warned on Monday that the German economy faces greater downside risks than upside potential in the short term. He cited U.S. trade policies and uncertainty stemming from Germany's upcoming election as major challenges.

U.S. President Donald Trump has previously threatened to impose punitive tariffs on imports from countries including Germany, sparking concerns that this would significantly harm Germany's export-reliant economy and undermine its already fragile growth outlook. Enditem

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