ifo Business Climate Eastern Germany Plummets (March 2022)
Sentiment among companies in eastern Germany has worsened considerably since the outbreak of war in Ukraine. The ifo Business Climate Index for the entire regional economy plunged from 99.9 to 93.2 points. This drop was due mainly to the drastic decline in business expectations across all economic sectors. Assessments of the current situation also dipped, though not as massively as expectations.
In eastern German manufacturing, sentiment was much gloomier in March. The expectations among the manufacturing companies surveyed took a nosedive. The optimism that prevailed at the start of the year has evaporated, with the companies taking a largely pessimistic view of the future. Assessments of the current situation were also much bleaker.
In March, the ifo Business Climate Index saw a clear dip in the eastern German service sector. Participants in the survey massively scaled back their business expectations and revised their assessments of the current situation sharply downward.
In eastern German trade, the barometer of business sentiment cooled as well. The wholesalers and retailers surveyed were once again more pessimistic about their business expectations. However, trading companies were noticeably more satisfied with their current business.
In eastern German construction, the Business Climate Index plummeted. The construction companies surveyed drastically lowered their expectations for the coming six months, while revising their assessments of the current situation significantly downward.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
