Ifo index rises for the fifth month in a row

The German economy is stabilizing despite the increasing number of infections, said Ifo President Fuest. But some industries that have been badly hit by the pandemic continue to have a difficult time.

Things are also running smoothly on the construction site.

Dhe mood among companies in Germany has brightened for the fifth month in a row. The Ifo business climate index rose in September to 93.4 points from 92.5 points in the previous month, as the Munich Institute announced on Thursday. Economists polled by Reuters had calculated with 93.8 points. “The German economy is stabilizing despite the increasing number of infections,” said Ifo President Clemens Fuest.

The managers judged the outlook for their businesses and their location to be more favorable than recently. “The German economy is currently moving safely in troubled pandemic waters,” said Ifo economic expert Klaus Wohlrabe to Reuters. “Disenchantment has spread among some service providers, especially in the travel and hospitality industries.” The rising number of infections depressed the mood here.

“What could be made up after the lockdown in the spring has been made up,” said LBBW chief economist Uwe Burkert. “Where it is more difficult, it will stay that way for a long time, especially in the service sector.” According to experts, the further course of the virus pandemic is decisive. “Due to the renewed increase in the number of corona infections and local lockdowns, there is considerable potential for disappointment,” warned Bastian Hepperle from Bankhaus Lampe. “After the initial successes, the economic recovery is becoming increasingly sluggish.”

Recession of five to six percent expected in 2020

In the manufacturing sector, the mood improved noticeably. Significantly fewer companies assessed their situation as bad. “In addition, more industrial companies expected their economic situation to continue to improve,” explained Fuest. The electronics industry in particular is optimistic. In the service sector, however, the index fell, after the last four increases in a row.

The mood picked up in retail. Many companies assumed a further recovery in the coming months. Things are also running smoothly on the construction site. “The indicator for the current situation climbed to its highest value since March of this year.” The outlook is still pessimistic, but a little less than in August.

The German economy collapsed by 9.7 percent at a record pace in the spring due to the Corona crisis. Economists and the federal government expect strong growth for the summer quarter that is coming to an end, the Ifo Institute, for example, is expecting an increase of 6.6 percent. Nevertheless, there is likely to be a severe recession with an economic slump of five to six percent in 2020 as a whole. In addition, the increase in corona cases in Germany and among important trading partners is causing uncertainty in the economy.