German economic outlook darkens, barometer hits lowest point since late 2025

The mood in the German economy has darkened considerably, according to the German Institute for Economic Research (DIW). The institute's business climate barometer has plummeted by 4.8 points to 91.3, reaching its lowest level since October 2025. This indicator, which normally hovers around the 100-point mark representing average growth, has shown volatility over the past year, dipping below 100 in most months.

DIW's head of economic research, Geraldine Dany-Knedlik, attributed the sharp decline to escalating geopolitical uncertainties, with the conflict in Iran being a major destabilizing factor. The barometer's month-to-month fluctuations have mirrored the unpredictable nature of these global events. "The geopolitical uncertainties, especially concerning the Iran war, reflect the rollercoaster ride of the DIW business climate barometer," Dany-Knedlik stated.

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The geopolitical uncertainties, especially concerning the Iran war, reflect the rollercoaster ride of the DIW business climate barometer.

Beyond international conflicts, persistently high energy prices continue to burden the German economy. Dany-Knedlik highlighted that these elevated costs reduce purchasing power for households and create uncertainty for businesses. "Overall, the still significantly increased energy prices continue to weigh on the German economy and lead to lower purchasing power for private households as well as uncertainty for companies," she explained.

Adding to the economic woes, the sluggish growth of the global economy is further suppressing demand for German exports. This combination of internal and external pressures paints a grim picture for Europe's largest economy, suggesting a challenging period ahead.

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Overall, the still significantly increased energy prices continue to weigh on the German economy and lead to lower purchasing power for private households as well as uncertainty for companies.