–Sentiment Falls to Record Low on Virus Effect
By Marco Babic
ZURICH (MaceNews) – Business conditions in Germany worsened dramatically in April on the pandemic effect, according to the Ifo Institute, as Ifo’s business sentiment index fell to a historic low of 74.3 from a revised 85.9 (86.1) in March.
Both current conditions and expectations fell as well, down to 79.5 and 69.4 respectively. Revised March figures for current conditions were 92.9 vs. 93.0, and March expectations was revised to 79.5 vs. 79.7 reported previously.
Markets were expecting the business sentiment index at about 80, with forecasts for current conditions at 81 and expectations at 75 for April.
“Sentiment at German companies is catastrophic” and has never fallen so much in one month, said Ifo President Clemens Fuest.
“This is primarily due to the massive deterioration in the current situation. Companies have never been so pessimistic about the coming months. The coronavirus crisis is striking the German economy with full fury,” Fuest said.
“In manufacturing, the Business Climate Index has fallen to its lowest value since March 2009. Industrial companies’ current business situation worsened dramatically. Expectations are marked by extreme pessimism. The expectations indicator fell to a historic low. Demand for industrial products has collapsed.
In the service sector, the business climate indicator fell to a record low. Service providers have never reached such a poor assessment of their current situation. The pessimism of their expectations is also without precedent.
“In trade, the Business Climate Index continued to nosedive. Assessments of the current situation have never worsened so quickly. Expectations came in even lower than March’s record low.
“In construction, the index has never sunk so abruptly. The same is true for the indicator of the current situation and for expectations. However, the majority of construction companies are still satisfied with their current situation.
In a separate report, IFO found that 50% of German firms are introducing short-shift work schedules.
“For many companies, short-time work is the method of choice for cushioning short-term sales losses and retaining their workforce,” said Klaus Wohlrabe, Head of Surveys at the ifo Institute.
Although Germany is introducing some measures to open the economy, the situation is not expected to improve soon.
In its most recent monthly report, the Bundesbank said that until a medical solution is found, there will be no imminent economic recovery.
“The first cautious easing of the containment measures have already been announced. Until there is a medical solution, substantial restrictions are likely to remain. For this reason, a rapid and strong economic recovery currently seems unlikely,” the report said.