Business sentiment among German companies has barely improved this year after initial euphoria. The business climate index compiled by the Munich-based Ifo Institute rose by only about 2.8 points between January and November, falling significantly short of previous years’ figures, the institute announced on Thursday. This is practically tantamount to stagnation.
The current business situation remained virtually unchanged, declining by 0.4 points, while expectations rose slightly by 5.9 points over the course of the year.
“The euphoria at the start of the year has already faded,” explained Klaus Wohlrabe, head of Ifo surveys. Companies are taking a “sober and concerned view of economic developments.” He noted a “stabilization of the business climate driven solely by expectations.”
The business climate in the industrial sector has improved noticeably since the beginning of the year. Nevertheless, according to the Ifo Institute, almost all sectors remain in negative territory, meaning they still have a predominantly pessimistic outlook.
For example, the business climate among manufacturers of electrical equipment improved significantly by 29.4 points over the year, but sentiment remained subdued: In November, the indicator reached minus 2.1 points.
In the chemical industry, sentiment deteriorated, particularly in October and November. Overall, the indicator there fell by 8.6 points. The barometer also dropped by 12.7 points among manufacturers of food and animal feed.
Sentiment in the retail sector recovered somewhat, but remained at a very low level at the end of the year and was generally worse than in previous years.
The construction sector showed an upward trend over the year. However, the Ifo Institute explained that the sector had “come out of a very deep trough” and had not managed to climb out of negative territory by November.
According to the survey, there was hardly any change among the service providers. Only in the warehousing sector did the mood improve significantly, by 13.1 points.
The hospitality sector is also in better spirits at the end of the year, according to the Ifo Institute, rising 6.8 points compared to January. In contrast, the business climate in the publishing industry fell by 14.9 points. Overall, across all sectors of the economy, “it’s clear that we can’t speak of a recovery,” explained Wohlrabe.
The institute’s index is based on approximately 9,000 monthly reports from companies in the manufacturing, service, trade, and construction sectors. The companies are asked to assess their current business situation and their expectations for the next six months.
AFP – Translated by Blackout News