German Ifo Business Confidence At 6-Month Low

German business confidence deteriorated to a six-month low in January as the second wave of coronavirus brought the recovery to a halt, survey results from the Munich-based ifo Institute showed Monday.

The business confidence index fell more-than-expected to 90.1 in January from revised 92.2 in the previous month. The score was forecast to drop moderately to 91.8. The reading was the lowest since July 2020.

Companies assessed their current situation as worse than last month and their expectations were also more pessimistic.

The current assessment index slid to 89.2 from 91.3 in the previous month. This was below the expected reading of 90.6. Likewise, the expectations index decreased to 91.1 from 93.0. The expected level was 93.2.

After eight consecutive rises, business confidence fell in manufacturing. This was due to notably less optimistic expectations among manufacturing companies. In contrast, assessments of the current situation were considerably better.

In the service sector, business confidence was significantly lower as companies adjusted their assessments of the current situation downward and were much more pessimistic about the coming months.

In trade, business sentiment nosedived, the survey showed. The indicator for the current situation plummeted into negative territory and marked its steepest drop since April 2020. Expectations were also sharply more pessimistic. Sentiment worsened across almost all retail segments.

Further, in construction, the business climate worsened further. Assessments of the current business situation were somewhat less positive. In addition, more companies were pessimistic about the months ahead.

With the current lockdown measures in place until mid-February and no significant easing in the offing immediately afterwards, the short-term outlook for the German economy is anything but rosy, Carsten Brzeski, an ING economist, said.

Destatis is slated to issue the fourth quarter GDP data on January 29. According to official estimate, the largest euro area economy contracted in the whole year of 2020. GDP fell 5 percent, the most since 2008-2009 financial crisis.

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