Germany: Business confidence drops again in April
April 24, 2019
After pessimism reigned in the first quarter, the second quarter opened in a similar fashion. Business confidence fell from a revised 99.7 in March (previously reported: 99.6) to 99.2 in April. The latest reading came on the back of less optimism regarding the current business climate and a more pessimistic outlook on business expectations.
Sector-by-sector data showed a somewhat mixed picture. Firms in the manufacturing sector downgraded their outlook on the current situation once again, which follows April’s PMI result showing a prolonged downturn in the sector. Unsurprisingly then, manufacturers’ views on business expectations deteriorated. As also evidenced by April PMI’s reading, the services sector remained healthy at the start of the second quarter: Service provides still rated the current business climate highly, albeit slightly less so than in March, while their business expectations became more optimistic. Businesses in the trade sector also still viewed the business climate with optimism; however, firms downgraded their outlook on both the current situation and business expectations somewhat. The construction sector, meanwhile, also remained in good health, mainly owing to the current business climate as doubts began to rise about the future.
Carsten Brzeski, chief economist at ING Germany, said April’s print underlined the “ongoing dichotomy” between services and manufacturing in the German economy. Moreover, the current downswing in Europe’s largest economy is particularly interesting, Brzeski added, because “the German economy […] did not show any excesses that would require a cleansing correction. Consequently, the economy is currently witnessing the slowdown which basically came from nowhere.” Even so, Brzeski mentioned that there are reasons to be mildly optimistic about the outlook for the German economy due to solid fundamentals and positive news out of China.
Author: Jan Lammersen, Economist