German sentiment worsens on latest pandemic wave, bottlenecks

Author: Jonathan Lopez

2021/11/24

MADRID (ICIS)--Business sentiment among German corporates worsened in November as the pandemic’s fourth wave takes hold and supply chain bottlenecks remain unresolved, research institute Ifo said on Wednesday.

Ifo’s Business Climate Index continued falling in November, as companies turned more negative on their current business situation as well as on future expectations.

In the petrochemicals, export-intensive German manufacturing sector companies assessed their current business situation as “considerably worse” although they became slightly more upbeat about the future, said Ifo’s president Clemens Fuest.

“Their [manufacturing companies] expectations, by contrast, brightened somewhat, especially due to developments in the automotive industry,” said Fuest.

“Supply bottlenecks in intermediate products and raw materials still have a grip on the manufacturing sector and a majority of companies plan to raise prices.”

The German chemicals industry is the largest in Europe. In 2020, it posted sales – including pharmaceuticals – of more than €185bn.

Following the continuous upswing of recent months, expectations in the petrochemicals-intensive construction sector turned more pessimistic, said Fuest.

By contrast, construction companies judged their current situation “to be somewhat better”, he added.

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SERVICES FEAR PANDEMIC HIT
Companies in the services sectors – around 80% of the German economy – are quickly turning more pessimistic as the pandemic’s fourth wave takes hold in the country.

Germany’s coronavirus infections and low vaccinations rates are like those in Austria, which entered a national lockdown on 22 November aiming to contain the spread of the pandemic.

Companies across the customer-facing services sectors are fearing potential lockdown measures will once again put their business under pressure, following the pattern observed in 2020.

“Sentiment in the service sector deteriorated noticeably. Scepticism grew substantially, especially as regards expectations. The last time the expectations indicator saw such a heavy decline was in November 2020,” said Fuest.

“However, service providers were less satisfied with their current situation as well. The fourth coronavirus wave caused expectations to plunge especially in the tourism and hospitality industries.”

Ifo’s Business Climate Sentiment Index on Wednesday came more in line with expectations from analysts, who were surprised on the upside with the more positive eurozone flash PMI manufacturing indices published on 23 November.

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Thumbnail picture source: BASF