War in Ukraine Causes ifo Business Climate Index to Plummet (March 2022)
Sentiment in the German economy has collapsed. The ifo Business Climate Index nosedived to 90.8 points in March, down from 98.5 points (seasonally adjusted) in February. This was due to a record collapse in expectations of 13.3 points, which is even more than it fell at the outbreak of the coronavirus crisis in March 2020 (11.8 points). Businesses also assessed their current situation as worse, but the fall here was comparatively moderate (1.6 points). Companies in Germany are expecting tough times.
In manufacturing, the index fell faster than ever before. Companies’ expectations also saw a record drop, flipping from optimism to pronounced pessimism. Moreover, companies now rated their business outlook as extremely uncertain. Assessments of the current situation were also lower.
In the service sector, too, the business climate worsened notably. This was due to a conspicuous drop in expectations. The outlook for the coming months is particularly bleak in the logistics industry. In contrast, service providers left their assessments of the current situation practically unchanged.
In trade, the Business Climate Index crashed. The expectations indicator saw a record collapse. Assessments of the current situation, however, were almost unchanged and remain positive.
In construction, the business climate deteriorated significantly. This, too, was driven by considerably more pessimistic expectations. Assessments of the current situation also worsened, but a majority of construction companies are still satisfied with their current business.
Clemens Fuest
President of the ifo Institute
