Status: 09/24/2021 12:13 p.m.
The mood in Germany’s economy has deteriorated for the third time in a row. The industry in particular is suffering from a “bottleneck recession”.
The ifo business climate index fell for the third time in a row. The development of the industry is of particular concern. The most important German economic barometer fell in September compared to the previous month from 99.6 points to 98.8 points, as the Munich economic research institute announced today in its survey of 9,000 decision-makers. Economists had expected a decline, if not quite as strong. For the third decline in a row, experts speak of an economic trend reversal.
“The problems with the procurement of raw materials and intermediate products are slowing the German economy,” said Ifo President Clemens Fuest. “The industry is experiencing a bottleneck recession,” said the economist, referring to the supply bottlenecks, which are largely a consequence of the pandemic. The companies surveyed assessed both their current business situation and the business outlook for the next six months with more skepticism than they had been in the past.
Scarcity everywhere
In manufacturing, the mood clouded over significantly. “A stronger decline was last observed in May 2020,” explained Fuest. The great optimism in the expectations from the spring has almost disappeared. The order books are still full, but new orders have flattened out.
“Almost 80 percent of industrial companies complain about bottlenecks in preliminary products, after 70 percent in the previous month,” said Ifo economic expert Klaus Wohlrabe in an interview with Reuters. “The warehouses in the industry have been swept clean.” This scarcity is at least partially passed on to customers via products and is likely to result in price increases.
“We should have a difficult fourth quarter ahead of us, in which the supply chain issue could even replace Corona as the main risk. And Corona is by no means over. All in all, rather unpleasant news from Munich,” commented Jens-Oliver Niklasch from LBBW .
Services and construction give hope
After all, the climate in the service sector brightened due to better expectations. “In the hospitality industry and tourism, a certain degree of confidence has returned after the great skepticism in the previous month,” emphasized Fuest. In logistics, however, the outlook clouded over, as in industry, while retail reported little change in sentiment.
In the construction industry, the business climate improved significantly. According to the Ifo, the assessment of the situation rose to its highest level since March 2020. Expectations also brightened noticeably.
So far, many economists have assumed that growth will have accelerated in the third quarter, which is coming to an end. The Kiel IfW Institute expects the gross domestic product (GDP) to increase by 2.2 percent compared to the previous quarter.