Monday, October 25, 2021
Ifo index falls for the fourth time
Companies fear renewed lockdowns
The effects of the pandemic continue to create problems for the German economy: Problems with supply chains and the fear of recurring corona restrictions cloud the mood in companies. Economic growth could stagnate.
The mood in the boardrooms of German companies deteriorated further in October. The business climate index determined by the Munich Ifo Institute fell for the fourth month in a row from 98.9 points in September to 97.7 points in October. Expectations in particular are “increasingly characterized by skepticism,” said Ifo President Clemens Fuest.
The current situation is also assessed less well. Delivery problems make the companies to create, as Fuest explained. “Capacity utilization in industry is falling. Sand in the gears of the German economy is holding back the recovery.” In the manufacturing sector, the business climate index fell further according to the information. The companies are somewhat less satisfied with their current situation; in addition, their expectations clouded over further.
Due to delivery problems, capacity utilization only reached 84.7 percent. The business climate also deteriorated in the service sector. According to the Ifo survey, companies rate their current situation somewhat better, but they are “much less optimistic” about the coming months. In trade, the Ifo index fell “significantly”. The dealers are noticeably less satisfied with their current business, their pessimism with a view to the coming months is increasing. Here, too, the delivery problems weigh on the mood, as the Ifo explained.
“The companies suspect that the politicians will react to the rapidly increasing corona infections with new restrictions,” wrote Commerzbank chief economist Jörg Krämer in a comment. In addition, the new corona wave is leading to factory closings, especially in Asia, which will exacerbate the material shortage in this country. “The German economy is unlikely to grow in the fourth quarter,” predicted Krämer.
Pre-crisis level not yet in sight
In his opinion, the German service sector will suffer from the fact that the non-vaccinated quarter of the German population will soon be excluded from contact-intensive services. ING Europe chief economist Carsten Brzeski also fears such a scenario: “All of this means that not only does the risk increase that economic growth will come to a complete standstill in the last quarter of the year, but also that the economy will not reach the pre-crisis level this year will achieve, “he wrote.
In the construction industry, on the other hand, the business climate again improved significantly. The companies assess the current situation somewhat better, and the expectations index increased for the sixth time in a row. For the business climate index, the Ifo Institute surveys around 9,000 companies every month. They are asked to assess their current business situation and to state their expectations for the next six months.