ifo Business Climate Index Rises Steeply (May 2021)
Sentiment among German managers has improved considerably. The ifo Business Climate Index rose from 96.6 points (seasonally adjusted) in April to 99.2 points in May. This is its highest value since May 2019. Companies were more satisfied with their current business situation. They are also more optimistic regarding the coming months. The German economy is picking up speed.
In manufacturing, the index rose slightly. Companies were once again markedly more satisfied with their current business. Their expectations took a major knock, but remained positive. Order books grew, and companies expect prices to increase.
In the service sector, the Business Climate Index climbed to its highest value since February 2020. This was a result of much more optimistic expectations. Assessments of the current situation also improved, with optimism returning to hospitality and tourism in particular.
The index jumped upward in trade, too. Businesses were more satisfied with their current situation. Cautious optimism also returned in their expectations. While wholesalers continue to benefit from positive developments in manufacturing, retailers are hoping the economy will open up further.
In construction, the business climate brightened. Companies’ assessments of the current situation improved somewhat. Expectations were also less pessimistic. However, material shortages became an even more pressing concern.
Clemens Fuest
President of the ifo Institute
