Ifo business climate increases

VW plant in Hanover

The expectations of German companies for the coming six months have risen.

(Photo: dpa)

Munich The mood in the German economy surprisingly improved at the beginning of the year. The Ifo business climate, Germany’s most important economic barometer, rose from December to January by 0.9 points to 95.7 points, as the Ifo Institute announced on Tuesday in Munich.

It is the first brightening since the middle of last year. Analysts, on the other hand, had expected a renewed downturn. “The German economy is starting the new year with a glimmer of hope,” commented Ifo President Clemens Fuest on the result. The companies surveyed rated the current situation somewhat worse than in the previous month.

According to the Ifo Institute, expectations for the coming six months have risen significantly. Despite the current Omicron wave, the business climate brightened in all the sectors considered.

Around 67 percent of companies reported problems in procuring raw materials and preliminary products in January, Ifo expert Klaus Wohlrabe told the Reuters news agency. In December it was still 82 percent. Things are now looking better again in retail: 63 percent still complained about delivery bottlenecks, after around 82 percent at the end of 2021.

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“But there is still no relaxation on the price front,” said Wohlrabe. At least every second industrial company wants to raise its prices further. It looks very similar in retail and wholesale. The inflation rate reached 5.3 percent in December, the highest level in almost 30 years.

Wohlrabe also sees positive signals. “But it is still too early to speak of a trend reversal.” Industry in particular is giving hope: their export expectations have increased noticeably at the beginning of the year. “The production plans are geared towards expansion,” said the expert.

The situation in the hospitality industry, which is suffering from the corona restrictions, is still bleak. “But at least the tourism industry is optimistic for the summer,” said Wohlrabe. “They expect good business during the peak travel season.”

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