The ifo Business Climate Index fell to 84.7 points in Germany in December, down from 85.6 points in November, putting the index at its lowest level since May 2020, new data from the ifo Institute has found.
The decline was largely driven by more pessimistic expectations among businesses, however many firms cited improvements in their current situation.
‘The weakness of the German economy has become chronic,’ the ifo Institute said.
Manufacturing and services
In the manufacturing sector, the index fell significantly, with companies ‘less satisfied’ with current business conditions, and their expectations ‘significantly gloomier’. The situation as regards business orders has worsened, and production cutbacks have been announced.
The service sector also saw a decline, mainly due to more skeptical expectations among businesses. However, the current situation was evaluated as somewhat better.
In trade, the index failed to maintain the upward trend seen over the past two months, with companies less satisfied with current business conditions. Pessimism also grew regarding business expectations. Wholesale was the primary driver of developments within the trade sector, although retailers also showed dissatisfaction.
In the construction sector, the business climate improved slightly, as companies were somewhat more positive about their current situation. However expectations worsened.
Finally, the catering sector reported positive Christmas business, while the transport and logistics sector is concerned about the coming months. Read more here.
Export expectations
Elsewhere, the ifo Export Expectations index dropped to -6.1 points in Germany, down from -5.8 points in November, signalling a decline in foreign business.
“The export economy is not developing any momentum at the end of the year either,” commented Klaus Wohlrabe, head of surveys at ifo. “Unlike in previous years, companies are not currently benefiting from the positive economic development in other countries.”
Several key sectors are anticipating a decline in exports in the coming months, including the metal industry, which remains the hardest hit, and the textile and clothing sectors. In addition, the automotive sector’s outlook has been negative for six months, while the chemical industry shows stable but uninspiring performance.
At the same time, Germany’s food and beverage industry expects significant growth in international sales, and manufacturers of electrical equipment are also slightly more optimistic. Read more here.
