Germany's economic sentiment at lowest since reunification

Author: Morgan Condon

2020/03/25

LONDON (ICIS)--Business sentiment among Germany's corporates continues to plummet in the wake of the coronavirus pandemic, according to economic research institute Ifo on Wednesday.

The Ifo business climate index tumbled to 86.1 points in March from 96.0 points in February, marking both the steepest since German reunification in 1990 and the lowest value since July 2009.

MANUFACTURING TUMBLES
Ifo's business climate index for the manufacturing sectors has dropped to the lowest level since August 2009 as companies across Germany have reported production curtailments, including in the chemicals-intensive automobile industry.

Germany's manufacturing sectors account for around 20% of its GDP as the economy's trade balance is heavily dependant on exports of goods.

Germany's chemicals industry is the largest  in Europe, with sales at around  €200bn/year.

"Never in the history of a reunified Germany has [Ifo's manufacturing index] fallen so far. The drop in expectations is the single most precipitous in 70 years of industry surveys," said Ifo.

"The fall in the indicator of the current situation was less pronounced. The index fell across all branches of industry, in some cases considerably."

Across all economic sectors, corporates' expectations have hit record lows and the assessment of the current situation has also deteriorated.

Trade expectations also fell to its lowest levels since German reunification with assessments of the current climate also taking a nosedive across wholesale and retail, with the exception of food retailers and pharmacies.

The chemicals-intensive construction sector recorded a more modest decline but given that the outlook has worsened, companies remain satisfied with their current situation.

VCI: Q4 DATA 'NO LONGER MEANINGFUL'
Germany's chemicals industry trade group VCI said on Wednesday they were cancelling the publication of its evaluation for the fourth quarter 2019 as the data is “no longer meaningful for the further economic development.”

VCI added it would not be making any forecasts at the moment because of the high levels of uncertainty presented by the current crisis, although it will release its 2020 forecast along with first quarter 2020 data when this becomes available.

In order for companies to maintain liquidity, the VCI has asked the German government to postpone due dates on income tax for at least six months and extend chargeability of losses to previous years.

Front page picture: The banking district in Frankfurt, Germany's financial capital
Source: Michael Probst/AP/Shutterstock

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