Germany: Business sentiment falls to over one-decade low in March
March 25, 2020
German business confidence nosedived more than previously estimated, with the final ifo Business Climate Index release for March showing that it fell to the lowest level since July 2009. In March, the index came in at 86.1 (previously reported: 87.7), down from February’s 96.0. The drop came on the back of considerably worse business expectations, linked to the coronavirus pandemic, and a deterioration in the assessment of the current climate. Clemens Fuest, president of the ifo Institute, added: “The German economy is in shock.”
Looking at sector-level data revealed that the downturn was broad-based. Within manufacturing, all subsectors recorded reduced sentiment levels, with many firms planning to curb output. This comes as business expectations fell to the lowest level in the survey’s history. Companies in the services and construction sectors were more downbeat about expectations as well, while views on the current situation diverged: Within construction, views remained positive, while sentiment regarding current conditions in the service sector moved into pessimistic territory. Sentiment in the trade sector took a beating as expectations fell to their lowest level since German reunification, while attitudes towards the current situation also deteriorated.
Carsten Brzeski, chief Eurozone economist and global head of macro at ING, commented: “An historic plunge of the Ifo index is another illustration of how severe the standstill is, without even being able to measure the exact size yet. […] All Western economies are facing an unprecedented crisis. Recession is not even the right word for an almost complete standstill of entire economies, almost overnight. Germany is no exception.”
Author: Jan Lammersen, Economist