ifo Business Climate Index Falls (January 2021)
Sentiment among German managers has deteriorated. The ifo Business Climate Index fell from 92.2 points (seasonally adjusted) in December to 90.1 points in January. Companies assessed their current situation as worse than last month. Their expectations were also more pessimistic. The second wave of coronavirus has brought the recovery of the German economy to a halt for now.
After eight consecutive rises, the index fell this month in manufacturing. This was due to notably less optimistic expectations among manufacturing companies. In contrast, assessments of the current situation were considerably better. Capacity utilization rose by 1.6 percentage points to 81.8 percent, but is still lower than its long-term average of 83.5 percent.
In the service sector, the business climate indicator was significantly lower. Companies adjusted their assessments of the current situation downward. They were also much more pessimistic about the coming months. Order book development was weaker, especially in transport and logistics.
In trade, the Business Climate Index nosedived. The indicator for the current situation plummeted into negative territory. This was its steepest drop since April 2020. Expectations were also sharply more pessimistic. Sentiment worsened across almost all retail segments, in some cases drastically. This month, in contrast to December, many indicators in wholesale also pointed downward.
The business climate worsened in construction, too. Assessments of the current business situation were somewhat less positive. In addition, more companies were pessimistic about the coming months.
Clemens Fuest
President of the ifo Institute
