Germany business confidence improves despite further manufacturing decline

LONDON (ICIS)–Business sentiment for German manufacturers has continued to decline despite a pick-up in confidence in other aspects of business, according to research from the ifo Institute on Monday.

The ifo Business Index rose in March from 98.7 to 99.6 following six months of continuous decline, indicating a more stable economic outlook.

This was supported by an increase in future business expectation, which climbed substantially to 95.6 compared to February’s 94.0.

“The companies are somewhat more satisfied with their current business situation, and they are decidedly more optimistic regarding business in the coming six months,” the economic agency said.

“The German economy is showing resilience…[but] manufacturers assessed their current business somewhat less positively. The outlook also worsened,” it added.

Any recovery was in stark contrast to sentiment for the manufacturing industry, as expectations fell to their lowest value since November 2012, coupled with the suggestion that things will continue to get worse.

With slow demand and limited expectations of an uptick in production, the outlook remains bleak for manufacturing, even though the index is more than 20 points weaker in a year-on-year comparison.

There was some room for optimism, the business climate index rose for the construction industry following several months of continued decline, with sentiment for trade reaching their highest levels since May and expectations for services also leaning towards a recovery.

“The fog of uncertainty continues to obscure the German economy’s true state as data is fluctuating widely, but fortunately today’s rise in March’s ifo index continues the string of recent cyclical green shoots after Friday’s horrific flash PMIs had caused concerns of an imminent recession,” said analyst group Oxford Economics.

“German industry remains the problem child with the ifo business climate continuing to contract for the seventh month in a row as weaker global trade, Brexit and US trade policy take their toll.

“On the positive side, the fall in the ifo manufacturing index looks less marked than Friday’s tumbling manufacturing PMI had suggested.

“Overall, the near-term outlook for the German economy remains highly uncertain against the backdrop of volatile surveys and the lurking downside risks,” it added.

Pictured: The European Central Bank Building in Frankfurt, Germany. Source: Georg Stelzner/imageBROKER/REX/Shutterstock