IFO index rises again
Will the Ukraine crisis choke off the spring upswing?
2/22/2022, 3:19 p.m
Most of the managers in the German executive floors are expecting a noticeable economic revival in the spring. However, a spiral of sanctions as a result of the Russian invasion policy could dampen or even stall the upswing.
If there is no spiral of escalation in the Ukraine crisis, the German economy expects an upswing in the spring. The barometer for the business climate rose in February for the second month in a row – from 96.0 to 98.9 points, as the Munich IFO Institute announced in its manager survey. Ifo expert Klaus Wohlrabe admitted, however, that the IFO survey results were “completely unaffected” by current events in Ukraine. Economists had expected the index to rise to just 96.5 points.
“The German economy is counting on an end to the corona crisis. However, the escalation of the crisis in Ukraine remains a risk factor,” said IFO President Clemens Fuest. The approximately 9,000 managers surveyed rated their business situation better. And the prospects for the next six months were seen even more rosy than recently.
The latest survey by the IHS Markit institute among purchasing managers fits in with this: According to this, the economy grew more strongly in February than it has for six months, despite the omicron wave. However, the Bundesbank assumes that the economic downturn that began in autumn 2021 will continue in the winter quarter. In the spring, however, there should be a strong recovery.
“However, the escalation of the Ukraine crisis is hanging over the economic outlook like the sword of Damocles,” says Commerzbank chief economist Jörg Kramer. If Russia were to turn off the gas supply should the crisis escalate further, he believes this could at least temporarily interrupt the economic upswing.
However, the consequences of the Russian invasion of eastern Ukraine threatened to suffocate the hoped-for spring upswing in the German economy. “Uncertainty will increase massively,” warned Ifo expert Wohlrabe: “That would be poison for the upswing.” Rising energy prices in particular could put a further strain on German companies.
DekaBank economist Andreas Scheuerle now sees the German economy confronted with two conflicting developments: “Corona easing with its positive effect on service providers is opposed to the negative consequences of the Ukraine conflict.” This leads to rising energy prices, uncertainty and burdens from sanctions and possible countermeasures. Even if that doesn’t bring us back into recession right away, it’s a severe damper for the economy.”