Supply Problems Weigh on ifo Business Climate (October 2021)
Sentiment in the German economy has clouded over. The ifo Business Climate Index fell from 98.9 points in September to 97.7 points in October. Skepticism is increasingly evident in expectations. Companies’ assessments of their current situation are also less positive. Supply problems are giving businesses headaches. Capacity utilization in manufacturing is falling. Sand in the wheels of the German economy is hampering recovery.
In manufacturing, the Business Climate Index fell once again. Companies are somewhat less satisfied with their current business. Expectations are also clouding further. Supply bottlenecks drove capacity utilization down 2.1 percentage points to 84.7 percent.
In the service sector, the business climate worsened again after a recovery in the previous month. Companies are considerably less optimistic about the coming months. However, their assessments of the current business situation are slightly improved.
In trade, the index fell markedly. Businesses are notably less satisfied with their current situation. They are also more pessimistic about the coming months. Here, too, supply bottlenecks are weighing on sentiment.
In construction, the business climate improved further. Companies’ assessments of their current situation are a little better. Moreover, the expectations index rose for a sixth consecutive time.
Clemens Fuest
President of the ifo Institute
