Ger­man busi­ness morale bright­ens de­spite fears of coro­n­avirus resur­gence

Arab News - - Business News - Reuters Ber­lin

Ger­man busi­ness morale im­proved for the fifth month in a row in Septem­ber, a sur­vey showed on Thurs­day, in a fur­ther sign that Europe’s largest econ­omy is en­joy­ing a solid re­cov­ery from the coro­n­avirus shock suf­fered in the first half of the year.

The Ifo in­sti­tute said its busi­ness cli­mate in­dex rose to 93.4 from a down­wardly re­vised 92.5 in Au­gust. This was the high­est read­ing since Fe­bru­ary when the in­dex stood at 95.9.

“The Ger­man econ­omy is sta­bi­liz­ing de­spite ris­ing in­fec­tion num­bers,” Ifo pres­i­dent Clemens Fuest said in a state­ment, adding that com­pa­nies once again as­sessed their cur­rent busi­ness sit­u­a­tion more op­ti­misti­cally than in the pre­vi­ous month.

The Ger­man econ­omy con­tracted by 9.7 per­cent in the sec­ond quar­ter as house­hold spend­ing, com­pany in­vest­ments and trade col­lapsed at the height of the COVID-19 pan­demic. The gov­ern­ment has since March un­leashed an ar­ray of res­cue and stim­u­lus mea­sures, fi­nanced with record new bor­row­ing, to cush­ion the im­pact.

In a sign that Ber­lin’s mas­sive re­sponse to the cri­sis, in­clud­ing job pro­tec­tion schemes and a tem­po­rary VAT cut, seems to be pay­ing off, busi­ness morale in man­u­fac­tur­ing im­proved con­sid­er­ably on up­beat ex­port

ex­pec­ta­tions, the sur­vey showed. In the ser­vice sec­tor, how­ever, sen­ti­ment fell for the first time in five months. Ifo econ­o­mist Klaus Wohlrabe said busi­ness morale in tourism and hospi­tal­ity had de­te­ri­o­rated again due to the ris­ing num­bers of coro­n­avirus in­fec­tions in re­cent weeks.

For the third quar­ter, Ifo now ex­pects the Ger­man econ­omy to grow by 6.6 per­centon the quar­ter, Wohlrabe said, adding that growth would likely slow to 2.8 per­cent in the fourth quar­ter.

KfW chief econ­o­mist Fritzi Koehler-Geib said the Ifo fig­ures showed that the easy part of the re­cov­ery was over now as in­fec­tions were also on the rise in many other coun­tries that are im­por­tant trad­ing part­ners for Ger­man man­u­fac­tur­ers.

“Both health pol­icy and eco­nomic pol­icy ef­forts must now fo­cus on en­sur­ing that the eco­nomic im­prove­ment con­tin­ues at a sat­is­fac­tory pace even af­ter the ex­pected record GDP growth in the third quar­ter,” Koehler- Geib said.


Ber­lin’s mas­sive re­sponse to the cri­sis, in­clud­ing job pro­tec­tion schemes and a tem­po­rary VAT cut, have boosted busi­ness morale.

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