German Business Confidence Improves Slightly

Germany’s business confidence improved marginally in February despite fears about the coronavirus outbreak, survey data from the ifo institute showed Monday.

The business climate index rose to 96.1 in February from a revised 96.0 in January. The score was expected to fall to 95.3 from January’s initial estimate of 95.9.

The German economy seems unaffected by developments surrounding the coronavirus, ifo President Clemens Fuest said. The survey results and other indicators suggest economic growth in the first quarter will amount to 0.2 percent, he added.

Although companies assessed their current situation as a little worse, they are less pessimistic about the next six months, the ifo survey showed.

The current conditions index came in at 98.9 versus 99.2 a month ago. This was above the forecast of 98.6. Meanwhile, the expectations index rose to 93.4 from 92.9. The expected reading was 92.1.

In manufacturing, the business confidence strengthened for the third consecutive month. This was due to considerably less pessimistic expectations. However, companies’ assessment of their current situation was worse.

Confidence among service providers fell again and they were somewhat less satisfied with their current situation and were more skeptical concerning the coming months.

In trade, the business climate worsened as recent improvements in the current situation and expectations suffered a setback.

In construction, the business climate index declined further. This was a result of companies’ more pessimistic expectations. In contrast, their assessment of the current situation was slightly better.

A surprise increase in the February Ifo together with last week’s positive PMI reading should normally be encouraging for the growth prospects of the German economy, Carsten Brzeski, an ING economist, said. However, the risk is things will first get worse before they can get any better, he added.

According to the Purchasing Managers’ survey, Germany’s private sector growth was largely unchanged in February. The flash composite PMI eased slightly to a two-month low of 51.1 from 51.2 in January.

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