Sentiment in German companies is deteriorating

Industry

Despite full order books, not everything can be produced in many industries due to missing parts.

(Photo: dpa)

Berlin The mood of top managers in Germany clouded over for the fifth month in a row in November. The Ifo business climate index fell to 96.5 points from 97.7 points in October, as the Munich Ifo Institute announced on Wednesday for its survey of around 9,000 executives.

Experts had expected a decrease to 96.6 points. “Delivery bottlenecks and the fourth corona wave are causing problems for companies,” said Ifo President Clemens Fuest. The bosses assessed the situation of their companies more skeptically than before and were also looking ahead more pessimistically.

In industry, the mood clouded over, as the companies rated their ongoing business noticeably less well. On the other hand, expectations brightened somewhat, which, according to Ifo, was primarily due to the development of the automotive industry.

“Supply bottlenecks for primary products and raw materials will not let the industry go,” emphasized Fuest. There is no relaxation to be seen here, said Ifo economic expert Klaus Wohlrabe in an interview with Reuters. “The situation is paradoxical: the order books are full, but production is still falling because of the delivery bottlenecks.” A clear majority of companies plan to increase prices.

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In the service sector, the business climate deteriorated noticeably. The last time there was a stronger decline in the expectation component was in November 2020. “The fourth wave of infections caused expectations to collapse, especially in the tourism sector and the hospitality industry.”

Retail price increases

In retail, too, things went downhill. “The mood in the retail trade is further burdened by delivery problems,” explained the Ifo boss. “Increased price increases are to be expected there in the coming months.” The mood at the building site deteriorated only slightly.

“The signs are now pointing to a contraction of the German economy,” said chief economist Thomas Gitzel from VP Bank. “Industrial production is suffering from the shortage of materials, with the violent fourth corona wave there is now a well-known negative factor for the service sector.”

DekaBank expert Andreas Scheuerle was also skeptical: “Even without a lockdown, the economy is already being damaged because consumers are increasingly withdrawing into their own four walls.” The consumption of services is beginning to decline, and purchases are increasingly being postponed. “The autumn storm can easily turn into a winter thunderstorm.”

For the current quarter, economists expect a slower economic recovery and some experts even expect the economy to shrink, while Wohlrabe and the Bundesbank expect largely stagnation. Delivery bottlenecks, increasing corona infections and higher energy prices are seen as the main brake on the economy.

More: The EU is losing the support of the German economy. A comment.

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