Ifo President Fuest: "The German economy is starting the new year with a glimmer of hope"

The mood among top managers in Germany brightened at the start of the year for the first time since June.

The Ifo business climate index rose surprisingly to 95.7 points in January, after 94.8 points in December, as the Munich-based Ifo Institute announced on Tuesday in its survey of around 9,000 executives.

Previously interviewed experts, on the other hand, had only expected stagnation.

"The German economy is starting the new year with a glimmer of hope," said Ifo President Clemens Fuest.

The bosses again assessed the situation of their companies more skeptically than last time, but looked to the future much more optimistically.

In the manufacturing sector in particular, the mood made a significant leap upwards.

Companies were more satisfied with current business and assessed their prospects better again.

"The situation with the delivery bottlenecks for preliminary products and raw materials has eased somewhat." Ifo economic expert Klaus Wohlrabe warned of euphoria with a view to the overall economy.

“There are positive signals.

But it is still too early to speak of a trend reversal.”

Hospitality still in crisis

Commerzbank chief economist Jörg Kramer emphasized that business expectations had risen significantly in all important sectors.

"Apparently, companies are increasingly looking through Omikron." Chief economist Alexander Krüger from the private bank Hauck Aufhäuser Lampe warned, however, of the negative effects of the geopolitical situation: "The Ukraine conflict has increased the risk that economic expectations will be disappointed."

For service providers, the Ifo business climate index rose again after three declines in a row.

"The pessimism about expectations has disappeared," said Ifo boss Fuest.

“The tourism industry is looking forward to the summer with hope.” However, the hospitality industry is currently still in crisis.

The mood also improved in trade and construction.

German economic output had probably shrunk somewhat at the end of 2021, by 0.5 to 1 percent according to an initial estimate by the Federal Statistical Office.

Most economists assume that the pandemic wave caused by the corona variant Omicron will also slow down the economy in the current first quarter.

Most recently, however, survey data from the IHS Markit institute among purchasing managers suggested that the economy, and above all industry in 2022, got off to an unexpectedly good start.

With the expected ebbing of the incidences, the economy should then recover noticeably from the spring.

For 2022 as a whole, the federal government expects growth of 3.6 percent, as can be seen from the draft of the annual economic report.