ifo Business Climate Index Falls (October 2020)
Sentiment among business leaders has clouded over. The ifo Business Climate Index fell from 93.2 points (seasonally adjusted) in September to 92.7 points in October. This is the first fall after five consecutive increases. Companies are considerably more skeptical regarding developments over the coming months. In contrast, they gave a slightly more positive assessment of their current situation than last month. In view of rising infection numbers, German business is becoming increasingly worried.
In manufacturing, the business climate indicator is back in positive territory for the first time since June 2019. A great many more companies were satisfied with their current situation. In the last quarter, companies managed to increase their capacity utilization considerably from 75.3 points to 79.8 points. However, recent optimism about the coming months has evaporated.
In the service sector, however, the business climate worsened notably. Service providers were less satisfied with their current situation. Moreover, their optimism of recent months with regard to the business outlook has disappeared.
In trade, the Business Climate Index fell slightly. While companies are more pessimistic about the coming months, they were more satisfied with their current business situation.
In construction, too, the business climate stopped climbing. Companies corrected their very strong assessments of the current situation noticeably downward. Their expectations also turned somewhat more pessimistic.
Clemens Fuest
President of the ifo Institute
