The mood in the executive suites of German business brightened slightly in February. Some executives assess the business prospects for the coming months somewhat better.
The overall gloomy mood in the executive suites of German business only brightened slightly in February. The ifo business climate rose to 85.5 points from 85.2 points in the previous month, the Munich ifo Institute announced today. The institute surveys around 9,000 managers every month about their assessment of the business situation and business prospects. The business climate had deteriorated in December and January and had recently fallen to its lowest level since May 2020.
The companies now assessed their current business situation unchanged. But their outlook for the coming months was slightly less pessimistic than in January. “The economy is stabilizing at a low level,” said ifo President Clemens Fuest. “Despite small glimmers of hope, the slump in the German economy continues,” said the head of the ifo surveys, Klaus Wohlrabe. “The situation remains difficult.”
Construction expectations continue to fall
In the service sector, the business climate improved in February, even if orders were still weak. The mood in trading deteriorated again. In the construction industry, the ifo index rose slightly from a low level. The companies that suffer from the comparatively high building interest rates assessed their situation somewhat better. “However, expectations have fallen to their lowest level since 1991,” said Fuest.
Wohlrabe summarizes the situation as follows: “There is still a lack of orders, both in industry and among service providers.” However, consumer-related service providers and consumer goods manufacturers are currently doing things a little easier. “You benefit from rising wages and falling inflation,” said the ifo expert. Price pressure could ease further in the coming months: fewer companies are planning to ask their customers to pay more.
Economy in crisis
The German economy is currently on the verge of a recession. At the end of 2023, the gross domestic product (GDP) shrank by 0.3 percent compared to the previous quarter, as the Federal Statistical Office confirmed today. In the previous two quarters there was at least stagnation, and at the beginning of 2023 there was at least a mini-plus of 0.1 percent. “In the final quarter, declining investment slowed down the economy, while consumption increased slightly,” said Statistics Office President Ruth Brand.
The federal government recently lowered its growth forecast for this year from 1.3 to just 0.2 percent. This was “dramatically bad,” said Economics Minister Robert Habeck (Greens). “We can’t continue like this.”