Germany: Business confidence falls back to pessimistic territory in August
The ifo Business Climate Index fell to 99.4 in August from 100.7 in July. Consequently, the index came in below the 100-threshold that separates pessimism from optimism among firms.
The drop in the headline reading was chiefly due to significantly less optimism regarding business expectations, while the assessment of current conditions improved somewhat. Expectations have been dented by supply-side bottlenecks and rising Covid-19 infections, which have put a strain on the economy. Concerns are particularly growing in the hospitality and tourism sectors, which would chiefly be hit by renewed lockdown measures. Looking at sector-level data, confidence in the manufacturing, service, and trade sectors fell. In contrast, sentiment in the construction sector rose as firms are slightly more satisfied with their current business and look ahead with greater optimism.