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Livesquawk - German Business Confidence Shows Fifth Consecutive Decline As Fourth Wave Hits Hard
German Business Confidence Shows Fifth Consecutive Decline As Fourth Wave Hits Hard
Germans are lining up for jabs as new Covid-19 cases soar.

- Headline reading, expectations fall short of estimates

- Current assessment in line with forecast

- Supply bottlenecks persist

- Covid-19 cases jump to record levels



By Eric Culp, European Editor

LiveSquawk News


24 November 2021 | 09:50 GMT


FRANKFURT – German managers expressed less optimism again in November after Europe’s most populous country continued to set records for new coronavirus cases, according to the results of the monthly poll conducted by Germany’s Ifo Institute.


The headline business climate index from the economic thinktank fell for the fifth straight month with a decline to 96.5 points in November versus the market estimate of 96.6 and the 97.7 reading announced last month.


The forward-looking business expectations component of the index dropped to 94.2, which was lower than both economists’ forecast of 94.6 and last month’s 95.4 result. The current assessment component slid to 99.0, matching the estimate but below October’s upwardly adjusted reading of 100.1.


Ifo said, “Supply bottlenecks and the fourth wave of the coronavirus are challenging German companies.”


Carsten Brzeski, head of macroeconomics at ING, said Wednesday’s Ifo poll results have already been overtake by events. “At the current juncture, and with the fourth wave of the pandemic escalating, all traditional leading indicators have actually become backward-looking indicators. They paint a picture of the economic outlook against the background of supply chain frictions, not the pandemic. As such, it will take until the December batch of confidence indicators before we have a better view of the economic impact of the fourth wave.”


What a difference a fortnight makes

Although economists had forecast decreases across the board for the Ifo index and its components, news on Tuesday suggested possible improvements. German flash purchasing managers’ indices (PMIs) for this month were better than expected, with increases reported for both the composite and services readings even though economists had predicted declines, and the manufacturing index slipped less than forecast.


And just over a fortnight ago, financial market experts were surprisingly optimistic about the next six months in Germany, which raised the forward-looking measure of the monthly poll results from the country’s ZEW economic institute for the first time since May. But this was before the latest coronavirus surge in Europe’s biggest economy, where single-day infection rates continue to set records: a report of the latest all-time high of more than 66,000 new infections came Wednesday, the same day that the country announced that it had for the first time crossed the seven-day incident rate of 400 per 100,000.


In the run up to the latest Ifo poll, Germany was already reporting record infections, and a number of states and municipalities had announced plans to once again restrict public activity. Berlin, for example, this week joined other major cities in cancelling that quintessential of all German winter events, the Christmas market.