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Germany Business Confidence January 2022

Germany: Business sentiment rises in January, but remains stuck in pessimism

The Ifo Business Climate Index rose to 95.7 in January from December’s nine-month low of 94.8. However, the index remained entrenched below the neutral 100-threshold that separates pessimism from optimism among German firms.

January’s uptick was solely due to less downbeat business expectations, as views towards the current situation worsened. Within the manufacturing sector, however, firms were more satisfied with their current business situation amid some easing of supply bottlenecks in intermediate products and raw materials. Looking at the services sector, sentiment rose for the first time in four months, and pessimism disappeared regarding expectations. Moreover, the tourism industry is anticipating a promising summer. This is likely aided by the less severe impact of Omicron.

Dr. Jörg Krämer, chief economist at Commerzbank, added:

“The unexpected rise in the January Ifo business climate index […] shows that German companies are increasingly looking through omicron. […] This supports our forecast that the German economy will recover strongly from early summer after a Corona-induced contraction in the winter half-year. […] [T]he order books in the manufacturing sector are fuller than at any time since the statistics began in the early 1960s.”

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