German Business Confidence Falls Amid Renewed Covid-19 Restrictions

German business sentiment deteriorated in November as companies were more pessimistic about future amid the second wave of coronavirus infections interrupting the economic recovery, survey results released by the Munich-based ifo Institute showed on Tuesday.

The business climate index fell to 90.7 in November from revised 92.5 in the previous month. The reading was forecast to ease to 90.1 from October’s initially estimated value of 92.7.

The decline was largely caused by more pessimistic view about the future. The assessment of current situation also worsened a little in November.

The current conditions index came in at 90.0 versus 90.4 a month ago. Economists had forecast the score to drop to 87.0.

At the same time, the expectations index declined to 91.5 in November from revised 94.7 in October. This was well below economists’ forecast of 93.5.

Business uncertainty has risen, Clemens Fuest, ifo President said. The second wave of coronavirus has interrupted Germany’s economic recovery.

The survey suggested that the latest lockdown has dented the summer optimism, Carsten Brzeski, an ING economist, said. The only upside is that more news about a vaccine and a timetable to roll it out should soon help to bring back this optimism.

Data released earlier in the day showed that the German economy rebounded at a faster than expected pace in the third quarter, offsetting a large part of the massive contraction in the second quarter.

Gross domestic product grew 8.5 percent sequentially, reversing the 9.8 percent decline in the second quarter caused by the coronavirus pandemic.

The ifo survey revealed that manufacturing was the bright spot. Companies assessing their current situation as markedly better. However, expectations for the coming months turned notably less optimistic.

In services, business climate deteriorated notably in November. For the first time since June, it was back in negative territory. Assessments of the current situation were much less positive than they were. Moreover, substantially more companies were pessimistic about months ahead.

Business climate worsened in trade as well. Companies were less content with their current situation. Their expectations were thoroughly clouded over, too.

In construction, business confidence fell somewhat. Companies’ assessments of their current business situation were slightly better than in the previous month, while their expectations were more pessimistic.

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