ifo Business Climate Eastern Germany Plummets (March 2022)
Sentiment among companies in eastern Germany has worsened considerably since the outbreak of war in Ukraine. The ifo Business Climate Index for the entire regional economy plunged from 99.9 to 93.2 points. This drop was due mainly to the drastic decline in business expectations across all economic sectors. Assessments of the current situation also dipped, though not as massively as expectations.
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In eastern German manufacturing, sentiment was much gloomier in March. The expectations among the manufacturing companies surveyed took a nosedive. The optimism that prevailed at the start of the year has evaporated, with the companies taking a largely pessimistic view of the future. Assessments of the current situation were also much bleaker.
In March, the ifo Business Climate Index saw a clear dip in the eastern German service sector. Participants in the survey massively scaled back their business expectations and revised their assessments of the current situation sharply downward.
In eastern German trade, the barometer of business sentiment cooled as well. The wholesalers and retailers surveyed were once again more pessimistic about their business expectations. However, trading companies were noticeably more satisfied with their current business.
In eastern German construction, the Business Climate Index plummeted. The construction companies surveyed drastically lowered their expectations for the coming six months, while revising their assessments of the current situation significantly downward.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
ifo Business Climate Eastern Germany
(Index, 2015 = 100, seasonally adjusted)
| 03/21 | 04/21 | 05/21 | 06/21 | 07/21 | 08/21 | 09/21 | 10/21 | 11/21 | 12/21 | 01/22 | 02/22 | 03/22 | |
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| Expectations |
Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Eastern Germany by Sector
(Balances, seasonally adjusted)
| 03/21 | 04/21 | 05/21 | 06/21 | 07/21 | 08/21 | 09/21 | 10/21 | 11/21 | 12/21 | 01/22 | 02/22 | 03/22 | |
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| Construction |
Source: ifo Business Survey.
© ifo Institute
The ifo Business Climate Eastern Germany is based on approx. 1,700 monthly survey responses from firms in manufacturing, construction, wholesale, and retail. The firms are asked to give their assessments of the current business situation and their expectations for the next six months. They can characterize their situation as “good,” “satisfactory,” or “poor” and their business expectations for the next six months as “more favorable,” “unchanged,” or “more unfavorable.” The balance value of the current business situation is the difference of the percentages of the responses “good” and “poor”; the balance value of the expectations is the difference of the percentages of the responses “more favorable” and “more unfavorable.” The business climate is a transformed mean of the balances of the business situation and the expectations. For the purpose of calculating the index values, the transformed balances are all normalized to the average of the year 2015.
