ifo Business Climate Index Rises Slightly (April 2021)
Sentiment among German managers has improved slightly. The ifo Business Climate Index rose from 96.6 points in March to 96.8 points in April. Companies once again raised their assessments of the current business situation. However, they were no longer quite so optimistic about the coming six months. Both the third wave of infections and bottlenecks in intermediate products are impeding Germany’s economic recovery.
In manufacturing, the business climate rose to its highest value since May 2018. Companies reported greatly improved business. The demand situation is still very good. Capacity utilization rose considerably from 81.9 to 86.2 percent. This brings it above its long-run average of 83.5 percent for the first time in almost two years. However, optimism declined with regard to expectations. Fully 45 percent of companies reported bottlenecks in intermediate products – the highest value since 1991.
In the service sector, the business climate indicator fell somewhat following a steep rise in the previous month. Service providers were slightly less satisfied with their current situation. Recent signs of optimism have disappeared again. While the logistics industry is benefiting from the upswing in manufacturing, other industries are still suffering, in particular hospitality and tourism.
In trade, the business climate improved a little. This was due to significantly improved assessments of the current situation, especially among car dealerships. In contrast, there was much greater pessimism regarding the coming months. The mood in wholesale is still better than in retail.
In construction, the business climate indicator fell. Companies were somewhat less satisfied with their current situation. Their expectations are also still marked by notable skepticism. Here, too, many companies reported material shortages.
Clemens Fuest
President of the ifo Institute
