German business confidence jumps on hopes of post-crisis rebound

By Andrew McCathie, dpa
Berlin (dpa) – German business confidence surged in March as the nation’s boardrooms tried to shrug off the threat posed to Europe’s biggest economy from escalating coronavirus cases.

The Munich-based Ifo institute said on Friday its closely watched business climate index jumped to a more-than-forecast 96.6 points this month from a revised February reading of 92.7 helped by a rise in optimism among manufacturers.

Analysts had forecast a gain in March to 93.2 from a previously estimated 92.4 in February.

“Despite rising infection figures, the German economy is starting spring with confidence,” Ifo President Clemens Fuest said releasing the survey results of about 9,000 German companies.

The Ifo’s March gain comes despite signs of chaos this week surrounding the country’s anti-coronavirus strategy, the extension of lockdown measures into next month as well as a shambolic rollout of anti-virus vaccinations.

Chancellor Angela Merkel was forced this week to halt and apologize for the confusion surrounding government plans to extend next week’s Easter public holidays as part of a new hard anti-virus lockdown.

“Today’s Ifo data give cause for optimism that the economy will recover strongly when the lockdown ends, perhaps at the end of May,” said Commerzbank chief economist Joerg Kraemer.

Economic optimism rose across key business sectors, including the service industry, which has been hard it by the coronavirus and the harsh lockdown measures, according to Friday’s Ifo survey.

The reading for the nation’s manufacturing sector, which has been excluded from the lockdown restrictions, hit its highest level since November 2010.

Driving the March Ifo higher was a sharp rise in the business leaders’ expectations of economic conditions six months down the track, which rose from a February reading of 95 to 100.4 points this month – a two-and-half year high.

The executives’ assessment of current business conditions also gained ground, edging up to 93 in March from 90.6 last month.

The Ifo survey chimed with another closely watched sentiment indicators released this week, including the London-based IHS Markit’s Purchasing Managers’ Index (PMI) for the German service and manufacturing sectors, which rose from 48.8 in February to 52.5 in March.

This was the first time that the PMI has risen above 50 since September. A reading above 50 indicates rising business activity.

As was the case with the Ifo survey, the preliminary composite PMI higher was boosted by a solid gain in the manufacturing industry. The service industry posted a more modest rise.

Investor confidence, as measured by the Mannheim-based ZEW institute survey of analysts and investment institutes, also posted a significant rise this month.

Meanwhile, consumer confidence hit its highest level since November, according to the Nuremberg-based GfK research institute forward-looking indicator for April.

In particular, the manufacturing sector has been benefiting from strong foreign demand, notably China.

German exports climbed by 1.4 per cent in January 2021 compared to December, Germany’s central bank the Bundesbank said this week with January factory orders jumping by nearly 3 per cent.

But underlining Germany’s uncertain start to the economic year, industrial production dropped 2.5 per cent month-on-month in January.