ifo Business Climate Index Has Dropped (August 2021)
The mood in the German economy has clouded over again. In August, the ifo Business Climate Index fell to 99.4 points, after 100.7 in July (seasonally adjusted). This decline was due mainly to significantly less optimism in companies’ expectations. Concerns are growing in the hospitality and tourism sectors in particular. By contrast, companies assessed their current situation as somewhat better than in the previous month. Supply bottlenecks for intermediate products in manufacturing and worries about rising infection numbers are putting a strain on the economy.
In manufacturing, the business climate was noticeably worse. Assessments of the current situation declined, but were still largely positive. The outlook for the coming months, however, took a clear dip, as the expectations indicator fell to its lowest level since November 2020. Companies also reported weaker demand.
The business climate indicator in the service sector dropped as well. The optimism with regard to future business development has faded. However, companies still assess their current situation as much better than in the previous month.
The index fell in trade also. Companies were less satisfied with their current business situation, and their expectations also turned more pessimistic. Retail especially is apprehensive about the coming months.
In construction, the index rose. Companies here were somewhat more satisfied with their current business, and their expectations were also much brighter.
Clemens Fuest
President of the ifo Institute
