ifo Business Climate Index Collapses (preliminary assessment 19 March 2020)
Sentiment among German managers has worsened drastically. The preliminary ifo Business Climate Index plummeted from 96.0 points (seasonally adjusted) in February to 87.7 points in March. This marks the biggest drop since 1991 and brings the index to its lowest level since August 2009. Companies’ expectations in particular have darkened as never before. Assessments of the current situation have also worsened considerably. The German economy is speeding into recession.
The preliminary assessment is based on approximately 90 percent of the usual number of responses. The survey was conducted between March 2 and March 18.
In manufacturing, the Business Climate Index fell to its lowest level since August 2009. Never in the history of a reunified Germany has it fallen so far. The drop in expectations is the single most precipitous in 70 years of industry surveys. The fall in the indicator of the current situation was less pronounced. The Business Climate Index fell across all branches of industry, in some cases considerably. Many companies have announced plans to curtail production and have slashed their plans for exports.
In the service sector, the business climate indicator saw the greatest fall since this data was first recorded in 2005. This applies both to the assessment of the current situation and to expectations.
In trade, the business climate indicator collapsed. Expectations tumbled to their lowest level since German reunification. Companies also revised their assessment of the current situation markedly downward. This development was equally negative across wholesale and retail.
In construction, the index fell comparatively moderately. Assessments of the current situation are still very positive. However, the outlook has worsened notably.
Prof. Dr. Dr. h.c. Clemens Fuest
President of the ifo Institute
