Wednesday November 24th 2021
Businesses are concerned
Ifo index continues to descend
Germany’s most important economic barometer continues to fall. The Ifo index is falling for the fifth time in a row. Delivery bottlenecks, inflation and the fourth corona wave are causing problems for companies. Some experts even see signs that the economy is shrinking.
The mood in the German economy deteriorated again in November. The Ifo business climate, Germany’s most important economic barometer, fell compared to the previous month by 1.2 points to 96.5 points, as the Ifo Institute announced. It is the fifth decline in a row.
Analysts had expected a somewhat more moderate decline on average. Economists interpreted the results as a sign of economic stagnation, in the worst case even contraction. “Delivery bottlenecks and the fourth corona wave are causing problems for companies,” commented Ifo President Clemens Fuest. The companies surveyed assessed both the current situation and the future prospects as less favorable than in the previous month. The business climate clouded over in all economic sectors considered.
In contrast to the strongly export-oriented German economy, French companies are more confident. The business climate brightened in numbers in November and is both above the level recorded before the Corona crisis and above its long-term average. The delivery problems and the high purchase prices apparently burdened the German economy more than the French, commented economist Ralf Umlauf from the Landesbank Hessen-Thüringen.
Experts with grim prospects
For some time now, German companies have been suffering from significant bottlenecks in global trade in goods, which have led to sharp price increases for many raw materials and intermediate products. For the most part, the bottlenecks are a consequence of the corona pandemic. The burden is increased by the clouding corona situation with a sharp rise in new infections.
Numerous federal states have already started to introduce stricter corona restrictions. That weighs on the growth prospects. Bank economists were accordingly skeptical. The economy continues to lose momentum, said Jens-Oliver Niklasch, economist from the Landesbank Baden-Württemberg. “At the moment, the corona situation, the supply chain issue and the rise in inflation are likely to weigh on the corporate sector.” Since there is no trend reversal in sight for the time being, the economic end to the year is likely to be unpleasant.
The signs are now pointing to a contraction of the German economy, warned Thomas Gitzel, chief economist at VP Bank, with a view to the final quarter of the current year. A short time ago stagnation was assumed, meanwhile a decline in gross domestic product is likely. Jörg Krämer, chief economist at Commerzbank, was also pessimistic: “The German economy should at best stagnate in the winter half-year.”