Status: 03/27/2023 11:00 a.m
Despite the turbulence in the banking sector, German top managers are becoming more and more confident. In March, the ifo business climate index rose for the fifth time in a row.
The mood in the executive floors of German companies surprisingly brightened further in March. The ifo business climate index rose to 93.3 points after 91.1 points in February, as reported by the Munich ifo institute. That was the fifth increase in the most important German leading indicator in a row.
In view of the recent unrest in the financial sector, economists had actually expected a slight decline to around 91 points. But among the approximately 9,000 executives surveyed, the business expectations in particular improved significantly.
“Despite the turbulence at some international banks, the German economy is stabilizing,” commented ifo President Clemens Fuest. The business climate improved in all economic sectors considered.
Relaxation in the supply chains
The increasing confidence is also likely to be related to easing supply bottlenecks, said ifo economic expert Klaus Wohlrabe. Only about four out of ten companies complained about supply chain problems in March. “The only downer is the construction industry,” says Wohlrabe. “Here the worry lines are still very deep.” Rising interest and material costs would put a particular strain on residential construction.
Unlike the other large institutes and the German Council of Economic Experts, ifo economic researchers are not expecting slight growth for this year, but rather a decline in gross domestic product of 0.1 percent. Recently, however, other leading indicators such as the purchasing managers’ index of the financial services provider S&P had signaled that the German economy had started the new year with momentum.
In the fourth quarter of 2022, Europe’s largest economy had shrunk by 0.4 percent. With two negative quarters in a row, economists speak of a technical recession.
Forecasts remain inconsistent
“The various leading indicators are currently developing very differently,” commented Jens-Oliver Niklasch, economist at LBBW. “Today’s business climate figures, however, underscore that the industrial economy has regained something of an inner strength, fed by a good order situation and the more robust supply chains.” Nevertheless, the economist remains cautious with regard to further economic development, referring to the many current downside risks.