The upward trend in the business climate ran through all sectors – from manufacturing and services to trade and construction.
(Photo: dpa)
Berlin The mood in the executive floors of German companies brightened up surprisingly in November. The Ifo business climate index rose to 86.3 points from the revised 84.5 points in the previous month, as the Munich-based Ifo Institute announced on Thursday in its survey of around 9,000 executives.
Economists surveyed by the Reuters news agency had only expected an increase to 85 points. Although the companies were less satisfied with their current business, the pessimism with regard to the coming months eased noticeably. Ifo President Clemens Fuest says: “The recession is likely to be less deep than many expected.”
The upward trend in the business climate ran through all sectors – from manufacturing and services to trade and construction. The revision of the previous month’s value now also shows that the Ifo business climate has improved for the second month in a row. “The German economy is sending out signs of hope,” explains Fuest.
From the economist’s point of view, the mild climate so far, full gas storage facilities and the concrete plans for LNG terminals speak for a slight brightening of the economic picture. Fritzi Köhler-Geib, chief economist at the state-owned KfW development bank, said: “The significant increase in Ifo business expectations is justified, because companies have recently been as endlessly pessimistic as they were before the major recessions.”
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However, slumps like those in the financial or corona crisis are only likely in the event of a gas shortage. In view of the full storage facilities and observable savings from industry and households, it is now considered unlikely that such a thing will happen in Germany in winter.
Recession is likely to be less deep
A few weeks ago, economic forecasters still considered it a foregone conclusion that Germany would slide into a recession in the winter half-year, i.e. shrink for two quarters in a row. This would also cause the growth rate to slip into negative territory for the full year 2023. Opinions differ on how far the German economy could shrink.
The energy crisis and delivery bottlenecks are considered to be a major burden for companies.
(Photo: imago/Hans Blossey)
The Association of German Chambers of Industry and Commerce (DIHK), for example, was extremely pessimistic and predicted a three percent decline in economic output for 2023 as a whole. The most recent economic forecast by the Advisory Council of Economic Experts, on the other hand, assumed significantly more relaxation and only saw a minus of 0.2 percent.
In the meantime, not only the Ifo business climate index but also other leading indicators have surprisingly improved. The purchasing managers’ index for the private sector rose by 1.3 to 46.4 points in November. This was announced by the financial service provider S&P Global on Wednesday for its monthly survey of around 800 companies.
That’s what economists say about the unexpectedly strong rise in the Ifo index
Nevertheless, the barometer, which is highly regarded on the financial markets, remained below the 50 mark for the fifth month in a row, from which point it signals growth. According to Commerzbank chief economist Jörg Krämer, the increase is still a good sign: “We’re getting a recession, but not a collapse.”
In the third quarter, the economy was surprisingly robust. While most economists had already expected a decline in economic output for the period from July to September, the gross domestic product surprisingly rose by 0.3 percent during this period.
Experts justify the fact that there is likely to be a recession in winter with the fact that private consumption is likely to collapse. The high energy prices restrict the consumption options, especially in low-income households.
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So far, however, there is not much to see. The current consumer barometer from the retail association HDE signals that consumers are willing to release an unusually large amount of savings in order to maintain their accustomed level of consumption.
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If the savings rate, which is a good ten percent on a long-term average, were to fall by two points, an additional 40 billion euros would be available for consumption purposes. In addition, there are the gas and electricity price brakes, the relief volume of which is said to be around 33 billion euros each.
with agency material
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