German Ifo Business Confidence At 5-Month High

German business confidence improved to a five-month high in February despite Ukraine crisis, survey results from the ifo Institute showed on Tuesday.

The business confidence index advanced to 98.9 in February from 96.0 in the previous month. This was well above the economists’ forecast of 96.5 and reached its highest level since September.

Companies were more satisfied with their current business and there was a marked improvement in expectations.

The current situation indicator came in at 98.6 in February, up from 96.2 a month ago and the expected reading of 96.6. Similarly, the expectations index improved to 99.2 from 95.8. The score was forecast to climb to 96.1.

“The German economy is betting on an end to the coronavirus crisis,” Clemens Fuest, ifo President, said. However, the escalation of the crisis engulfing Ukraine remains a risk factor.

The latest escalation of Russia-Ukraine tensions will undoubtedly increase uncertainty, but the economic impact on Germany is likely to be limited unless very stiff sanctions are imposed, Jessica Hinds, an economist at Capital Economics, said.

In the latest monthly report, released Monday, Bundesbank said the economic output is set to decline noticeably in the fourth quarter.

Nonetheless, the economy will pick up speed again in the spring, provided the pandemic subsides and the supply bottlenecks continue to ease.

In manufacturing, business climate rose sharply, the ifo survey showed. Companies were clearly more satisfied with their current situation. Their expectations were also more optimistic.

Although order books grew once again, material shortages continued to hamper production, the institute noted.

In the service sector, the business climate improved considerably as the indicators of the current business situation and of expectations jumped higher in February.

Further, the business climate indicator rose in trade, too. Businesses were much more satisfied with their current situation. Their expectations also brightened tangibly. However, both wholesalers and retailers continue to report supply bottlenecks.

In construction, the business climate improved somewhat. This was due to more positive assessments of the current business situation. However, the outlook was a little more pessimistic.

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