The mood among Germany’s business leaders brightened again in August, according to the Munich-based Ifo Institute’s latest reading.
The Ifo Business Climate Index showed an uptick to 92.6 points in August, from 90.4 in July, as company bosses show increased optimism about the current situation as well as for the six months ahead.
“The German economy is on the road to recovery,” Ifo president Clemens Fuest said.
The German economy contracted by 9.7% in the second quarter of 2020, compared with the same period in 2019, as the coronavirus pandemic lockdowns caused economic activity to plunge to a record quarterly low.
Investments excluding construction fell by 19.6%, exports fell by over 20% and private consumption was down 10.9%.
In Germany’s powerful manufacturing sector, the index found manager outlook to be “significantly” more optimistic in terms of the assessment of the current situation, as the order books begin to fill up again. However, there is still a lot of residual gloom in their short-term outlook.
Service providers were significantly more satisfied with their current business situation and showed an improvement in their outlook for the next six months.
The reading on business sentiment among retailers revealed a slight increase in satisfaction with the status-quo, but they remain pessimistic about the future. The mood among wholesalers got worse on both counts.
Construction companies were once again more satisfied with their current situation, but are also pessimistic about the coming months.
“For now, today’s Ifo index keeps the hopes for a V-shaped rebound alive,” said ING chief eurozone economist Carsten Brzeski. “However, the fact that a rebound is not necessarily the same as a recovery will be the main theme of the coming months.”