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German business confidence jumps on post-pandemic economic hopes

February 26, 2021


Abstract : German business confidence surged to its highest level since October this month on hopes of a rebound in Europe's biggest economy and an end to tough restrictions aimed at containing the coronavirus.

German business confidence surged to its highest level since October this month on hopes of a rebound in Europe's biggest economy and an end to tough restrictions aimed at containing the coronavirus.

The Munich-based Ifo institute said on Monday that despite the current lockdown, its closely watched business climate index jumped to a more-than-forecast 92.4 points this month from a revised January reading of 90.3.

"Companies are ... starting to look beyond the pandemic and the lockdown," said Commerzbank chief economist Joerg Kraemer.

Analysts had forecast a more modest gain in February to 90.5 from a previously estimated 90.1 in January.

The Ifo's release came ahead of next week's meeting between Chancellor Angela Merkel and the 16 state premiers on what further steps to take in facing up to the crisis.

Powering the index higher were the executives' bullish outlook for business conditions six months down the track, as well as a rise in their assessment of the current state of the nation's economy.

Based on a survey of about 9,000 business leaders, the Ifo February gain was in line with solid rises in other leading indicators, despite concerns about the faltering rollout of anti-virus vaccines.

This includes the ZEW index measuring the mood among German investors as well as the London-based IHS Markit's latest composite purchasing managers' index for the country's service and manufacturing sectors.

"The German economy is proving robust despite the lockdown, mainly because of the strong industrial economy," said ifo President Clemens Fuest.

Optimism among manufacturers was also a key factor in boosting the Ifo's overall February business climate index with the industrial sector having been largely excluded from the current lockdown.

Underscoring the devastating economic impact on Germany wrought by the spread of the deadly virus, industrial production fell by 10 per cent last year compared with 2019, according to figures released on Monday by the Federal Statistical Office (Destatis).

But this month, the Ifo index measuring the mood in boardrooms across the manufacturing sector climbed to a more-than two-year high in February.

Data drawn up by Destatis and released on Monday also underlined the key role that trade with China is playing in helping Germany emerge from the economic crisis unleashed by the pandemic.

Despite the crisis, China remained Germany's leading trading partner in 2020 for the fifth consecutive year, Destatis said.

Monday's data was also in line with Destatis figures released earlier this month showing Chinese demand for "Made in Germany" goods as helping Europe's biggest economy post a modest gain in total exports as 2020 came to an end.

There were also even the first signs of optimism in Germany's service sector, which has been badly hit by the lockdown and remained in the doldrums in February, the Ifo survey showed.

Several state governments have already begun drawing up plans for a staged end to the lockdown, which is currently due to expire next month after it was introduced in November and then more recently toughened up and extended.

But after falling in recent weeks, new figures have shown a spike in new coronavirus infections across the nation, raising the risk of the country being engulfed by a third wave of the pandemic and the need for further action to halt the spread of the virus.

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Keyword: German business confidence

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