Manufacturing Weighs on ifo Business Climate (September 2021)
Sentiment in the German economy has suffered another setback. The ifo Business Climate Index fell from 99.6 points in August (seasonally adjusted) to 98.8 points in September. This is the third consecutive fall. Companies were less satisfied with their current business. They were also more skeptical about the coming months. Problems in the procurement of raw materials and intermediate products are putting the brakes on the German economy. Manufacturing is experiencing a bottleneck recession.
In manufacturing, the Business Climate Index fell sharply. Companies were noticeably less satisfied with their current business. Not since March 2020 have assessments fallen so far. Last spring’s great optimism in expectations has almost completely evaporated. Order books are still relatively full, but order intake is leveling off.
In the service sector, the business climate improved. This was due to companies’ appreciably more confident expectations. Their assessments of the current situation, however, were slightly worse. In hospitality and tourism, a degree of optimism has returned after last month’s major skepticism. In contrast, expectations in logistics deteriorated in parallel with manufacturing.
In trade, the index was almost unchanged. While businesses were a little more satisfied with their current situation, their pessimism concerning the coming months grew somewhat. A large majority of businesses reported supply problems with their orders.
In construction, the business climate improved markedly. Assessments of the current situation rose to their highest level since March 2020. Expectations, too, brightened considerably.
Clemens Fuest
President of the ifo Institute
