Germany: Business confidence ticks up in February
February 22, 2021
Business confidence in Germany rose to a four-month high of 92.4 in February from 90.3 in January. However, the index remained below the 100-threshold that separates pessimism from optimism.
The uptick in the headline reading reflected an overall improvement in the assessment of the currency climate and expectations. Looking at sector-level data, confidence in all sectors improved in the month. Within the service sector, sentiment in the tourism industry showed cautious optimism regarding the upcoming holiday season, as the rollout of vaccination programs should facilitate the gradual easing of restrictive measure domestically and abroad, leading to a return to normalcy. Within the trade industry, however, companies’ views the current situation less favorably, with sales nosediving due to lockdown measures.
Clemens Fuest, president of the ifo Institute, commented: “The German economy is proving robust despite the lockdown, especially thanks to strength in industry.”
Carsten Brzeski, global head of macro at ING, added:
“These days, we remain cautious about interpreting traditional leading indicators. (…) Alternative data is of more use, even though mobility data might currently give a worse picture of actual economic developments than in 2020, simply due to adaptions to the new situation. With this in mind, as encouraging as today’s Ifo index readings are, they should be taken with a pinch of salt. What the Ifo index shows is that German businesses have followed financial markets in looking through negative short-term effects from lockdown measures and slow vaccinations. Nothing more, nothing less.”
Author: Jan Lammersen, Economist