German chems sector facing ‘serious problems’, in contrast with minor decline in other sectors

LONDON (ICIS)–Sentiment in the German business climate declined slightly in August but the nation’s chemicals industry indicated “serious problems”, according to the latest data from the Ifo Institute on Thursday.

The Ifo Business Climate Index fell to 88.5 points in August, down from 88.7 points in July, as both the current mood and outlook remain poor and rife with uncertainty.

As a leading economic indicator, the downturn in the chemicals sector supports the Ifo Institute’s expectations of economic contraction in Germany in the third quarter.

Apart from the chemicals segment, overall sentiment for manufacturing was largely stable, as although producers assessed the current situation as slightly worse, near-term forecasts were less pessimistic, and order backlogs were reduced.

Construction also marked an improvement for both metrics, with pessimism for the coming months lessening slightly and the current situation viewed as having improved slightly.

In contrast, the indicator for the trade segment continued to decline, with fewer companies having a positive assessment of the current climate, and expectations still extremely pessimistic.

Sentiment for traders was weighed down by escalating inflation, which has led to higher costs that they are having to pass downstream at a time of softening demand.

Sentiment in the services sector recovered slightly after a significant hit last month. Current business was assessed as somewhat better supported by an increase in tourism, although expectations remain weak, driven by gloomy forecasts from the hospitality segment.

Thumbnail picture: BASF’s steam cracker at Ludwigshafen, Germany. Source: BASF