Ifo business climate brightens surprisingly

business German economy

Ifo business climate brightens surprisingly

Status: 10:55 a.m | Reading time: 2 minutes

The companies surveyed rated the current situation somewhat worse than in the previous month. However, expectations for the coming six months rose significantly

Source: dpa / Daniel Josling

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“The German economy is starting the new year with a glimmer of hope,” says Ifo President Clemens Fuest. Because the Ifo business climate, the most important barometer for the German economy, surprisingly improved in January – for the first time in six months.

Dhe mood in the top floors of the German economy, which had been gloomy recently, surprisingly brightened again at the beginning of the year. The Ifo business climate index rose to 95.7 points in January, after 94.8 points in December, as the research institute announced on Tuesday in Munich. Accordingly, the companies assess the current situation somewhat worse. However, expectations rose significantly.

“The German economy is starting the new year with a glimmer of hope,” said Ifo President Clemens Fuest. In the manufacturing sector, the index has made a significant leap upwards. “Companies were more satisfied with current business. In addition, optimism increased with regard to the coming months,” explained Fuest. The situation with the supply bottlenecks for preliminary products and raw materials has “relented somewhat”, he continued. According to the Ifo, capacity utilization rose from 84.9 to 85.6 percent.

In the service sector, the business climate index rose again after three declines in a row. The pessimism about the expectations has disappeared, explained Fuest. The tourism industry looks “hopefully towards the summer”. The service providers were less satisfied with the current situation. “The hospitality industry is still in crisis,” added the Ifo President.

Trade and construction more optimistic

In trade, the business climate improved according to Ifo data. While companies assessed their current situation somewhat more poorly, expectations had brightened significantly. In the retail sector in particular, noticeably fewer companies were pessimistic about the future.

The index also increased in the main construction trades. According to Ifo, the entrepreneurs were somewhat happier with the current business. The expectation indicator also rose. “The material bottlenecks continued to decrease,” explained Fuest.

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For the business climate index, the institute surveys around 9,000 companies every month. They are asked to assess their current business situation and their expectations for the next six months. In the past year, the index had fallen repeatedly up to and including December due to widespread supply bottlenecks and developments in the corona pandemic.