ifo Business Climate: Sentiment in the economy is improving

Status: 04/25/2022 11:04 a.m

The mood in the German economy brightened up surprisingly in April. Nevertheless, not all sectors are optimistic about the coming months.

Despite the war in Ukraine, the mood in the executive floors of German business has brightened somewhat. This is the result of the business climate index published today by the ifo Institute. The barometer unexpectedly rose to 91.8 points in April, as the Munich Institute announced today in its monthly survey of around 9,000 managers.

Economists surveyed by Reuters, on the other hand, had expected a decline to 89.1 points. In March, Germany’s most important economic barometer fell to 90.8 points due to Russia’s invasion of Ukraine.

“Economy shows resilience”

“After the initial shock of the Russian attack, the German economy has shown itself to be resilient,” said ifo President Clemens Fuest. The executives assessed their business situation and the prospects for the coming six months as better than recently, the mood has stabilized at a low level. The still pessimistic expectations of companies brightened noticeably, but the current situation was rated hardly better.

However, the assessment of the sectors differs, because the business climate improved above all in industry and among service providers. The service providers were significantly more satisfied with current business and are less pessimistic about the coming months. Transport and logistics companies in particular were able to recover from the slump in the previous month. Against the background of an easing Corona situation with significantly relaxed measures, the business climate was also able to improve in the hospitality industry.

The purchasing managers’ index recently published by the financial services provider S&P Global was also surprisingly robust.

Weak construction

In trade and construction, however, the mood deteriorated: In the construction industry, the index fell to its lowest level since May 2010; industry expectations have never been so pessimistic since reunification. Large material bottlenecks in particular are having a negative impact on business.

According to the economists, how the situation will continue to develop depends on the further development of the Ukraine war. According to calculations by the Bundesbank, an escalation and tightened sanctions against Russia would hit the German economy hard. Already at the beginning of the year, the economy in this country was treading water.

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