German Ifo Business Confidence Rises Marginally In April

Germany’s business confidence improved only slightly in April as restrictions related to the coronavirus pandemic and supply bottlenecks weigh on economic activity, survey results from the ifo Institute showed on Monday.

The business confidence index rose less-than-expected to 96.8 in April from 96.6 in the previous month. The score was forecast to rise to 97.8.

Companies once again raised their assessments of the current business situation. However, they were no longer quite so optimistic about the coming six months.

Both the third wave of infections and bottlenecks in intermediate products are impeding Germany’s economic recovery, Clemens Fues, ifo Institute President said.

April’s Ifo business sentiment survey is consistent with the economy treading water at the beginning of the second quarter as optimism has been dented by supply bottlenecks and the Covid-19 restrictions, Andrew Kenningham, an economist at Capital Economics, said.

The German economy will have a very poor first half of the year but it should stage a sustained recovery from the third quarter onwards, the economist added.

The current conditions index came in at 94.1, up from 93.1 in March but below the expected level of 94.4.

At the same time, the expectations indicator dropped to 99.5 from revised 100.3 a month ago. Economists had forecast the reading to rise to 101.3.

In manufacturing, business sentiment rose to its highest value since May 2018. Companies reported greatly improved business.

However, optimism among manufacturers declined in April. Fully 45 percent of companies reported bottlenecks in intermediate products, which was the highest value since 1991, the survey showed.

In the service sector, the business climate indicator weakened in April following a steep rise in the previous month. Service providers were slightly less satisfied with their current situation. Recent signs of optimism also disappeared.

In trade, the business climate improved a little. This was due to significantly improved assessments of the current situation, especially among car dealerships. In contrast, there was much greater pessimism regarding the coming months.

In construction, the business climate indicator dropped in April as companies were somewhat less satisfied with their current situation and their expectations are still marked by notable skepticism.

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