The sentiment among German companies has continued to deteriorate recently. According to the Ifo Institute, the Business Climate Index dropped to 84.4 points in April, down from 86.4 points recorded in February. This marks the lowest reading for the index since May 2020. Companies surveyed by Ifo expressed significant pessimism regarding the coming months and also assessed their current business situation negatively. Notably, the war in Iran is impacting the German economy severely.
Sector by sector, the difficulties are varied. In manufacturing, the climate worsened, primarily due to significantly more pessimistic expectations, particularly within the chemical industry. Although companies rated their current status slightly better, they reported increasing difficulties with shortages of raw materials.
The service sector saw a marked decline in the index, with the dip in expectations continuing. Assessments of the current situation also proved less favorable, and the logistics sector, in particular, is reportedly under intense pressure with bleak prospects.
In retail, the business climate gave back sharply. Companies noticeably adjusted their judgments downwards for both the current situation and future expectations. Retailers are particularly concerned that inflation is causing consumers to curtail their spending power.
Finally, the construction sector saw its business climate plummet. Expectations dropped by nearly 10 points, and companies expressed much lower satisfaction with ongoing operations. For now, hopes for an economic upturn are reportedly dashed.
