German Ifo Business Confidence Deteriorates In November

Germany’s business sentiment weakened in November as the fourth wave of pandemic caused expectations to fall especially in the service sector, survey results from the ifo Institute showed on Wednesday.

The business confidence index fell to 96.5 in November from 97.7 in October. The reading was forecast to drop to 96.6.

Companies were less satisfied with their current business situation, and expectations became more pessimistic.

The current conditions indicator came in at 99.0, in line with expectations, and down from 100.2 a month ago. At the same time, the business expectations index posted 94.2 in November. The score was expected to fall to 95.0 from October’s 95.4.

Supply bottlenecks and the fourth wave of the coronavirus are challenging German companies, Clemens Fuest, ifo President, said.

The survey suggested that the German economy was struggling even before the recent tightening of Covid restrictions, Andrew Kenningham, an economist at Capital Economics, said. Things will be much worse in December as coronavirus restrictions are tightened further.

In the manufacturing sector, the ifo business climate index fell as companies assessed their current business as considerably worse. By contrast, their expectations brightened somewhat, especially due to developments in the automotive industry.

According to ifo, supply bottlenecks in intermediate products and raw materials still have a grip on the manufacturing sector and a majority of companies plan to raise prices.

Sentiment in the service sector deteriorated noticeably in November. Skepticism grew substantially, especially as regards expectations. Service providers were less satisfied with their current situation as well.

The business climate index weakened in trade reflecting greater pessimism in companies’ expectations, although they rated their current situation as somewhat improved. The mood in retail continues to suffer due to supply problems and prices are more likely to increase over the coming months, the survey showed.

The business climate in the construction industry worsened slightly in November. Following the continuous upswing of recent months, expectations have turned more pessimistic. Companies judged their current situation to be somewhat better.

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