The business climate within the German chemical industry continued to worsen in May. The Ifo Institute’s business climate index fell to -30.2 points, down from -28.6 points recorded in April.
While firms reported their current business situation as slightly better than in April (improving from -25.8 points to -17.5 points), expectations dramatically declined, dropping from -31.3 to -42.0 points. According to Anna Wolf, an expert on the sector at Ifo, companies view the current temporary upturn in core business as fleeting.
The special economic upturn that began in April persisted into May. Parts of the industry are benefiting from higher demand for chemical products, driven by disrupted global supply chains. However, the supply situation for precursor materials remains strained: 31.1 percent of companies reported material shortages, a significant increase from just 7.0 percent in the first quarter. In line with this tightness, prices for chemical products rose sharply. The price development indicator compared to the previous month increased to 47.5 points, up from 32.5 points in April, with the majority of firms forecasting further price increases.
Despite the increased demand, companies are planning for lower production levels and continued staff reductions. Export expectations also deteriorated notably, falling to -15.7 points from -2.0 points in April. Wolf concluded that while this temporary boom provides short-term relief to the industry, the structural core problems remain unsolved.
