Germany: Business confidence returns to optimism in June
June 25, 2021
Business confidence rose to 101.8 in June from May's 99.2. June's result marked the best performance since November 2018. As a result, the index moved north of the 100-threshold, indicating optimism among businesses.
The return to optimism came on the back of a much rosier assessment of the current business situation, likely driven by the gradual reopening of the economy, while views on business expectations also improved. Looking at sector-level data, sentiment in the manufacturing industry rose to its highest level since April 2018; however, views regarding business expectations turned somewhat less upbeat amid concerns supply-side issues. In the services sector, confidence regarding both the current situation and expectations jumped, with service providers anticipating strong sales growth. Within the trade sector, the improvement in sentiment was particularly steep in retail, reaching a record high as restrictions were eased. Lastly, material shortages remained a bottleneck in the construction sector and, as such, confidence rose only marginally.
Carsten Brzeski, global head of macro at ING, added:
“Another strong Ifo reading sets the bar for German growth even higher. Now the only thing that's missing is for the hard data to catch up. […] Looking ahead, the general outlook for the German economy has improved. The vaccination program has picked up speed and with currently more than 50% of the population having had a first jab, the reopening of the economy has gained momentum, too. New variants of the virus, however, could still spoil the reopening party. Back to the positives, the potential spillovers from US fiscal stimulus, the implementation of the European Recovery Fund in the second half of the year, a rebound in the construction sector and the fact that the manufacturing sector still has not reached pre-crisis levels, all signal one thing; the only way is up for the German economy.”
Author: Jan Lammersen, Economist