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German business confidence slipped unexpectedly in September, raising fresh doubts about the government’s ability to deliver the promised economic turnaround.

The Munich-based Ifo institute reported Wednesday that its closely watched business climate index fell to 87.7, down from a revised 88.9 in August. Analysts had expected a slight improvement on hopes of a major fiscal stimulus, making the decline a setback for Europe’s largest economy.

The survey was released as Chancellor Friedrich Merz opened the Bundestag’s budget debate, stressing defence spending, energy price reductions and plans to cut bureaucracy. “There is no time to lose: Our country has to feel now that things are getting better,” Merz told lawmakers.

For businesses, however, progress appears too slow. Ifo’s results indicated companies were less satisfied with current conditions and more pessimistic about the months ahead. “The surprisingly sharp decline dampens hopes for a rapid economic recovery,” said Deutsche Bank economist Robin Winkler.

The Ifo data followed Tuesday’s S&P Global PMI survey, which showed private-sector growth at its fastest pace in over a year but warned of weakening demand.

Meanwhile, public confidence is also waning. A Bild poll found just 28 percent of Germans believe the government can revive the economy, down from 43 percent in May.

via Politico