Coronavirus Wave Weighs on ifo Business Climate (December 2021)
Sentiment at German companies has clouded over for Christmas. The deteriorating pandemic situation is hitting consumer-related service providers and retailers hard. The ifo Business Climate Index fell from 96.6 points in November to 94.7 points in December. Companies assessed their current business situation as less positive. Pessimism regarding the first half of 2022 also increased. The German economy isn’t getting any presents this year.
In German manufacturing, the index rose again after falling five times in a row. This is due to more optimistic expectations on the part of companies. Order books grew substantially. However, companies’ assessments of the current situation were somewhat worse. Supply bottlenecks for intermediate products and raw materials intensified once more.
In the service sector, the business climate nosedived. The last time the index fell this far was in April 2020. Service providers were considerably less satisfied with their current business. Expectations, having recently been slightly optimistic, also turned pessimistic. Survey responses plummeted, especially in tourism and hospitality.
The index fell sharply in trade as well. Businesses’ assessments of their current situation were markedly less positive. The expectations indicator fell to its lowest level since January. While developments left wholesale relatively unscathed, survey results in retail were as dramatic as they were last winter.
In construction, the business climate worsened. Assessments of the current situation were a little less positive. Moreover, there was a notable increase in pessimism regarding the coming months.
Clemens Fuest
President of the ifo Institute
