Coronavirus and Bottlenecks Put a Damper on ifo Business Climate (November 2021)
Sentiment in the German economy has taken a downward turn. The ifo Business Climate Index fell from 97.7 points in October to 96.5 points in November. Companies were less satisfied with their current business situation, and expectations became more pessimistic. Supply bottlenecks and the fourth wave of the coronavirus are challenging German companies.
In German manufacturing, the index fell as companies assessed their current business as considerably worse. Their expectations, by contrast, brightened somewhat, especially due to developments in the automotive industry. Supply bottlenecks in intermediate products and raw materials still have a grip on the manufacturing sector and a majority of companies plan to raise prices.
Sentiment in the service sector deteriorated noticeably. Skepticism grew substantially, especially as regards expectations. The last time the expectations indicator saw such a heavy decline was in November 2020. However, service providers were less satisfied with their current situation as well. The fourth coronavirus wave caused expectations to plunge especially in the tourism and hospitality industries.
The index slid in trade because of greater pessimism in companies’ expectations, although they rated their current situation as somewhat improved. The mood in retail continues to suffer due to supply problems and prices are more likely to increase over the coming months.
The business climate in Germany’s construction industry worsened slightly. Following the continuous upswing of recent months, expectations have turned more pessimistic. Companies judged their current situation to be somewhat better.
Clemens Fuest
President ot the ifo Institute
