German Business Confidence Poised For Sixth Straight Decline Amidst Latest Corona Wave

- Headline reading forecast at 95.3 (prev 96.5)

- Expectations set to drop to 93.5 (prev 94.2)

- Current assessment expected at 97.5 (prev 99.0)

- Supply bottlenecks persist

- Covid-19 spread continues

- Data due Friday at 09:00 GMT

 

 

By Eric Culp, European Editor

LiveSquawk News

@EricCulpLS

 

16 December 2021 | 08:50 GMT

 

FRANKFURT – A survey of German managers is expected to show less optimism about Europe’s largest economy as the fourth wave of the coronavirus stokes concerns.

 

An economists’ poll predicted a sixth consecutive decline in the Ifo Institute’s headline business climate index this month with a drop to 95.3 from the November reading of 96.5.

 

The expectations component for the next six months is forecast to fall to 93.5 from November’s mark of 94.2, and the current assessment reading from Ifo’s monthly survey of is set to decline to 97.5 from 99.0.

 

December preliminary purchasing managers’ indices for Germany released Thursday showed a slight uptick in the manufacturing gauge and a sharper-than-expected decline in the service measure, which fell in to contraction territory.

 

On Tuesday, Ifo slashed its German growth forecast for 2022 to 3.7% from its September estimate of 5.1%, but the economics institute boosted its 2023 projection to 2.9% from 1.5%. Ifo reiterated its 2.5% forecast for the current year, noting that it expects the economy to shrink 0.5% this quarter. The thinktank predicted annual inflation of 3.3% next year in Europe’s largest economy.

 

A drop in this month’s Ifo business confidence measures would follow increased pessimism amongst financial market experts. In early December, Germany’s ZEW economic institute said the results of this month’s poll showed declines in optimism about both the present and the next six months.

 

Societe Generale went against the consensus, noting that it expects the headline reading to edge higher. “Expectations should improve slightly on easing supply disruptions, while rising COVID restrictions and high energy prices could work in the other direction.”

 

The bank noted that the order flow in industry has held up well, which suggests that once the supply disruptions ease even more, business sentiment should improve. “Industrial production jumped strongly in October, but we expect the weakness to continue at the end of the year before recovering gradually next year with the gradual easing of the supply problems.”

 

Covid concerns

The seven-day average for new coronavirus cases in German remained above 45,000 on Tuesday, according to data from John Hopkins University. German parliament last week approved inoculation requirements for health care workers, who have until 15 March to ensure they are fully vaccinated.

 

The resurgence of the coronavirus has forced the country to again restrict the populace, and this time the focus has been on the unvaccinated. Protests against the latest constraints have been on the rise and have turned violent in a number of cases, especially in the eastern states, where infection rates are high and the vaccination rates are low.

 

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