The Russian war of aggression in Ukraine and supply chain problems are causing problems for the German economy. Recently, the mood in the management floors of the companies has brightened somewhat.
According to a survey by the Ifo Institute, the German economy is not heading for a recession despite the war in Ukraine and problems with the supply chains. In May, the mood in companies surprisingly brightened again.
The Ifo business climate rose by 1.1 points compared to April to 93.0 points, as reported by the Ifo Institute in Munich after a survey of around 9,000 companies.
Slight recovery since March
Analysts were surprised by the development. On average, they had expected the score to drop to 91.4 points. In March, Germany’s most important economic barometer collapsed due to Russia’s invasion of Ukraine and has since recovered slightly. While the assessment of the current situation improved noticeably in May, the expectations of future business were hardly better assessed by the companies surveyed.
“There are currently no signs of a recession,” said Ifo President Clemens Fuest, commenting on the survey results. Despite fears of inflation, material shortages and the war in Ukraine, the German economy is proving to be robust. “Above all, the companies were noticeably more satisfied with their current business,” adds Fuest. Expectations, on the other hand, have hardly changed, so companies remain skeptical.
Different situation depending on the industry
In the services sector, companies were “noticeably more satisfied” with current business, according to the Ifo Institute’s statement. By contrast, service providers’ expectations were more pessimistic. Transport and logistics companies in particular were concerned. In construction, the business climate has recovered somewhat after the crash in April.
“It is mainly thanks to the improved assessment of the situation that the most important German economic barometer rose in May,” says Thomas Gitzel, Chief Economist at VP Bank. The assessment of future business, however, remains at a low level. At second glance, it is therefore evident that “the German economy remains in the autumn and winter mood”.
Expert sees stagnation coming
The chief economist at Commerzbank, Jörg Krämer, sees the easing of corona restrictions and the strong recovery in the service sector as a counterweight to falling industrial production. The brightening of the Ifo business climate should not hide the fact that industry is likely to continue to suffer from China’s zero-corona policy and war-related delivery problems. Krämer therefore expects the German economy to stagnate in the second quarter.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
