ifo Business Climate Eastern Germany: Historic Slump – No End in Sight (April 2020)
The eastern German economy’s downward trend accelerated again in April 2020. The ifo Business Climate Index for the region’s economy as a whole plummeted from 89.6 to 78.9 points, which is in line with the strong slump across Germany as a whole. Eastern German survey participants’ assessments of the current situation and their business expectations plunged more drastically than ever before. The coronavirus crisis has hit all areas of the eastern German economy and is weighing more heavily on the mood of companies than the financial crisis did.
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In eastern German manufacturing, sentiment has started to nosedive. The current business situation and business expectations plummeted in equal measure. In March, the rate of decline had still been slow.
The ifo Business Climate Index continued its downward trend in the eastern German services sector. The fall in assessments of the current situation was greater than the slump in business expectations.
In eastern German trade, the deterioration in sentiment accelerated dramatically, driven primarily by the extreme collapse of the retail trade business situation compared with the previous month. At the same time, the outlook became even gloomier. In wholesale, both subindices continued to nosedive.
In eastern German construction, the business climate plunged dramatically compared with the previous month. This was mainly due to the business expectations. Assessments of the current situation also plummeted.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
ifo Business Climate Eastern Germany
(Index, 2015 = 100, seasonally adjusted)
| 04/19 | 05/19 | 06/19 | 07/19 | 08/19 | 09/19 | 10/19 | 11/19 | 12/19 | 01/20 | 02/20 | 03/20 | 04/20 | |
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| Expectations |
Source: ifo Business Survey.
© ifo Institute
ifo Business Climate Eastern Germany by Sector
(Balances, seasonally adjusted)
| 04/19 | 05/19 | 06/19 | 07/19 | 08/19 | 09/19 | 10/19 | 11/19 | 12/19 | 01/20 | 02/20 | 03/20 | 04/20 | |
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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.
