Economy
Comments of KfW Research
25.07.2025 | ifo business climate July 2025

"German corporates remain tentatively optimistic according to latest Ifo survey. Ifo business climate edged slightly higher in July, reaching its highest level since October last year. The moderate pickup in momentum of the German economy seems to be continuing at the beginning of the third quarter, which is also reflected in an improved assessment of current conditions. At the same time, the assessment of the medium-term outlook is stagnating, which can be linked to the ongoing uncertainty regarding the trade conflict, and its potential outcome, with the US."
Dr Dirk Schumacher
25.07.2025 | Comments on the upcoming Fed meeting on 30 July 2025
"The Fed is likely to pause interest rates once again at its meeting on July 30. The recent uptick in inflation, coupled with a still-robust labor market, argues for a wait-and-see approach. However, the focus is increasingly shifting away from the monetary policy decision itself and toward the growing political pressure on Fed Chair Jerome Powell. Donald Trump has recently intensified his criticism and makes no secret of his desire to see new leadership at the top of the central bank. This political interference casts a shadow over the Fed’s independence and is likely to increase uncertainty about its policy direction in the coming months. If doubts arise over whether monetary policy decisions are driven by economic reasoning or political motives, the risks to markets and financial stability could be significant."
Dr Stephan Bales
German Economy / European Economy
KfW Business Cycle Compass Germany / Eurozone
From trade shock to fiscal boost
26 May 2025
After a long barren spell, the planned fiscal boost provides the prospect of an upswing next year. In our current spring forecast, we anticipate that Germany’s gross domestic product will stagnate in 2025 but grow by 1.0% in 2026. In addition to a stabilisation of exports, significant growth impetus is likely to come from government investment in particular in 2026. In the current year, however, investments are likely to remain weak, while exports will fall again in light of the increased US tariffs. We expect euro area GDP to grow by 0.8% in 2025 and by 1.0% in 2026. The persistent services inflation contrasts with falling energy prices and disinflationary effects coming from US tariff policy. We have lowered our inflation forecasts (HICP) for 2025 to 2.0% in the euro area and 2.1% in Germany.

KfW-ifo SME Barometer
SMEs play a decisive role for the growth and prosperity of an economy. Using its unique surveys, studies and statistics, KfW Research analyses the needs of SMEs in Germany. The KfW-ifo SME Barometer indicators are based on a scale-of-enterprise evaluation of the ifo economic surveys, from which the well-known ifo business climate index is calculated, among others. Around 9,500 businesses, including around 8,000 SMES, from manufacturing, construction, wholesale, retail and services (excluding lending, insurance and state) are polled monthly regarding their economic situation.
Sentiment continues to improve on expectations
3 July 2025
Despite the simmering trade conflict between the US and the EU and other countries as well as the 12-day war that broke out between Israel and Iran in June, SME sentiment continued to brighten at the beginning of summer. This was mostly due to the steadily growing belief in a better economic future, whereas business situation assessments showed that current conditions remain difficult.

Contact
KfW Research, KfW Group, Palmengartenstrasse 5-9, 60325 Frankfurt, Germany, research@kfw.de
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