ifo Business Climate: „The strongest increase ever measured“.

 

The mood in German companies continued to improve strongly in June. This is shown by the ifo Institute’s survey. The business climate index rose from 79.7 to 86.2 points, and the ifo Institute emphasizes that this is the „strongest increase ever measured“.

But does this also mean that the real situation of German companies improved accordingly in June? Unfortunately, we cannot assume that this is the case. On the one hand, the recent rise in the business climate index is strongly related to expectations. In other words, companies are assuming that their sales or production will develop positively in the next six months – compared with the status quo. Given the still very difficult situation in most sectors, this assumption is certainly plausible.

By contrast, companies are much more cautious in their assessment of the current business situation. The indicator for the current situation improved only slightly in June from the low in the previous month. This shows that the road back to normality will still be a very long one.

Nevertheless, the figures presented by the ifo Institute were on the whole much better than expected. Especially the retail sector stands out here, where the mood has improved enormously according to the latest survey results in May and June. Given the continuing restrictions on shops and the reports of lost sales and retail companies in existential difficulties, this is quite astonishing. One explanation may be that those segments of the retail sector where things are going really well despite or precisely because of the crisis are masking the problems in other areas of the retail industry. Food retailing and DIY stores, for example, are making good sales and are in a correspondingly positive mood. By contrast, the situation in department stores, clothing stores and car dealerships remains rather bleak. However, this is not properly reflected in the aggregated figures.

All in all, it is of course gratifying to see that the mood in German companies is improving again. This shows that the economy is on the road to recovery after the low in April. However, one should not take the current figures to mean that the road back to normality has already been taken to a good extent. On the contrary, it is likely to be quite long and may also involve some temporary lows.

Rate this article


Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 0

Leave an answer

Your e-mail address will not be published. Required fields are marked *