Germany Ifo Business Confidence Strengthens In January

German business confidence improved at the start of the year as companies expect the disruptions from the Omicron variant to ease in coming months, survey results from the ifo Institute showed on Tuesday.

The business climate index rose to 95.7 in January from revised 94.8 in the previous month. The reading was forecast to remain unchanged at 94.7.

While companies’ assessments of the current situation were somewhat less positive, their expectations improved considerably in January.

The current situation index came in at 96.1, down from 96.9 in December and economists’ forecast of 96.3.

Meanwhile, the expectations index advanced to 95.2 in January from 92.7 in the previous month. The expected score was 93.0.

The German economy is starting the New Year with a glimmer of hope, Clemens Fuest
President to the ifo Institute said.

With the Omicron wave likely to recede in February and March, the economy should return to growth in the first quarter, Andrew Kenningham, an economist at Capital Economics, said. The economy is expected to grow 0.5 percent sequentially.

In manufacturing, business sentiment jumped significantly as companies were more satisfied with their current business, the survey showed. Also, they were more optimistic about the coming months.

In the service sector, business confidence rose again after falling for three consecutive months. Pessimism disappeared from companies’ expectations. However, service providers were less satisfied with their current situation.

The business climate improved in trade. While companies’ assessments of their current situation were slightly worse, their expectations brightened noticeably.

In construction, the business climate index rose. Companies were somewhat more satisfied with their current business. The expectations indicator also rose.

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