The recovery of the German economy lost further momentum in November.

The business climate index of the Munich Ifo Institute fell by 1.2 points to 96.5 points, as the institute announced on Wednesday.

It is now the fifth decline in a row.

"Delivery bottlenecks and the fourth corona wave are causing problems for companies," said Ifo President Clemens Fuest.

The monthly survey of around 9,000 companies is an important economic indicator. 

Svea boy

Editor in business.

  • Follow I follow

The mood slump spread through all industries. Both industrial companies and service providers rated their ongoing business “noticeably” worse. The expectations of the industry brightened somewhat, which was mainly due to the development of the automotive industry. But the "supply bottlenecks for preliminary products and raw materials are not let go of the industry," said Fuest. A clear majority of industrial companies plan to increase prices. Even in the retail sector, which is also suffering from delivery bottlenecks, increased price increases are to be expected in the next few months.

The service providers are particularly pessimistic about the coming months.

The expectation indicator last fell more sharply in November 2020.

The fourth wave of infections caused expectations to collapse, particularly in the tourism and hospitality sectors, explained Fuest.

On the other hand, the purchasing managers' index of the London Markit Institute rose surprisingly in November.

The sentiment barometer for Germany published on Tuesday climbed 0.8 points to 52.8 points.

It was the first increase after three decreases.

This means that the index is still slightly above the 50 point mark, which signals growth.

Nonetheless, the growth in orders was as weak as it was last in February.

In addition, material bottlenecks, higher energy and labor costs, logistics problems and increased prices at suppliers "have led to unprecedented cost inflation," said Markit economist Lewis Cooper.

The German companies have therefore raised their sales prices at a new record rate.

This also had an impact on the business outlook: According to Markit, they have not been as optimistic as they have been in over a year.

Economy should "at best stagnate" in winter

With that the hope for a conciliatory end of the year disappears. In fact, the mood is probably even more gloomy, said Alexander Krüger, chief economist at Bankhaus Lampe. Because the corona wave is unlikely to have "spilled over" completely into the survey results. It is clear that the economy is “continuing to lose steam”, said Jens-Oliver Niklasch, chief economist at the Landesbank Baden-Württemberg. In the short term, there is no trend reversal in sight. 

"Politicians want to avoid blanket shutdowns, but some virologists warn that extreme overloading of the health system in many places can only be prevented with general contact restrictions and the closure of nightlife," warned KfW chief economist Fritzi Köhler-Geib.

A look at Austria shows that, as a last resort, extensive lockdowns are possible again.

The pandemic is not only depressing the business prospects in retail and services, said Jörg Krämer, chief economist at Commerzbank.

The industry is also suffering because supplies from China are still stagnating because of the no-civid strategy there.

That is why the German economy will "at best stagnate" in the winter half-year, he expects.

For Thomas Gitzel, chief economist at Liechtenstein’s VP Bank, the signs now even point to “a shrinking German economy.

Until recently it was still possible to assume that the gross domestic product would stagnate, but now a decline in GDP in the current quarter has become probable ”.

According to Carsten Brzeski, chief economist at ING Bank, the bad mood among companies does not bode well.

The fourth wave of the pandemic could actually drive the economy to the brink of stagnation or even a technical recession.

"However, the ability of the economy to adapt to lockdowns, supported by measures by governments and central banks, has increased significantly since March 2020," said Brzeski.

Keywords: