Germany: Business confidence improves but remains depressed in December
Business confidence in Germany’s private sector rose to 92.1 in December from 90.9 in November, which had marked a four-month low. However, the index remained below the 100-threshold that separates pessimism from optimism.
The uptick in the headline reflected less skepticism regarding activity in the next six months and improved optimism regarding the current business situation. The result was broad-based with all subcomponents rising except for business expectations in the construction sector. As a result, sentiment in the sector was unchanged while it improved in all other sectors.
Clemens Fuest, president of the ifo Institute, commented: “While the lockdown is hitting certain sectors hard, overall the German economy is showing resilience.”
Carsten Brzeski, global head of macro at ING, added:
“Interpreting today’s Ifo index is not easy as it was possible to fill in the survey before and after the announcement of the country’s strict lockdown last Sunday. Therefore, the higher Ifo reading probably tells us more about the news and the rolling out of the vaccine, rather than the new lockdown measures. […]. Expect the entire economy to go into hibernation at the turn of the year. A double dip in the fourth quarter looks inevitable, even though the strong performance of the manufacturing and construction sector up to now should make this contraction a very mild one. Looking ahead, however, it currently seems reasonable to expect an extension of the lockdown measures beyond 10 January.”