The Ifo Business Climate Index for Germany fell 1.2 points to 87.7 in September 2025, down from a revised 88.9 in August and below market expectations of 89.3. The reading marked the lowest since May and the sharpest monthly drop in over a year, reflecting growing pessimism among firms. Both expectations (89.7 vs. 91.4 in August) and current conditions (85.7 vs. 86.4) weakened, suggesting uncertainty surrounding US tariff policy has weighed on sentiment, clouding the outlook for Europe’s largest economy. Across industries, sentiment deteriorated among manufacturers (-13.3 vs. -12.4), service providers (-3.0 vs. 2.6) and traders (-22.9 vs. -21.4), but improved among constructors (-14.6 vs. -15.5). “Companies were less satisfied with current business, while their expectations clouded noticeably. Prospects for an economic recovery have suffered a setback", Ifo President Clemens Fuest said.