The mood in the management floors of German companies brightened noticeably in February.

The business climate index of the Munich Ifo Institute, which is considered an important economic indicator, rose by 2.9 points to 98.9 points, as the research institute announced.

The barometer is based on a monthly survey of around 9,000 companies.

"The German economy is counting on an end to the Corona crisis," said Ifo President Clemens Fuest.

The escalation of the crisis in Ukraine remains a "risk factor".

Svea Junge

Editor in Business.

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Confidence runs through all sectors.

The companies rated their current business situation as better, as well as their prospects for the next six months.

In the service sector in particular, the indicator jumped up.

"Optimism has returned in the hospitality industry," said Fuest.

In industry, however, material bottlenecks are still hampering production.

Wholesalers and retailers also continue to report delivery bottlenecks.

Other mood barometers also increased in February.

The purchasing managers' index published on Monday by the London-based Markit Institute for the German economy rose by 2.4 points to 56.2 points - more than it has been for six months.

The barometer is thus well above the 50-point mark, which signals growth.

"Poison for the economy"

The positive mood indices are overshadowed by the Ukraine crisis.

"The rising mood in companies gives hope for an economic recovery, but now the sword of Damocles of an escalating Russia-Ukraine conflict is hanging over it," said KfW Chief Economist Fritzi Köhler-Geib.

Andreas Scheuerle from Deka Bank warned that the surveys were initially out of date because they did not contain the possible consequences of the Russian invasion of eastern Ukraine.

Now there are two conflicting developments.

"Corona relaxations with their positive effect on service providers are opposed to the negative consequences of the Ukraine conflict," says Scheuerle.

In the end, the crisis could threaten the economic upswing.

"The danger that the spring recovery will falter is increasing by the hour," said ING chief economist Carsten Brzeski.

Bilateral trade with Russia is not big enough to stop industry picking up overall due to improved supply chains.

"A further escalation of the situation, however, brings new uncertainty, which is poison for the economy," he warned.

In addition, there are expected sanctions from the West against Russia.

Economists are particularly worried about an impending energy crisis.

"If Russia were to turn off the gas tap if the crisis escalated further, this could at least temporarily interrupt the economic upswing," said Commerzbank chief economist Jörg Krämer. "That's a real economic risk."

Holger Schmieding, chief economist at Berenberg Bank, estimates that a Russian attack on Ukraine would delay recovery by one to two months.

He also expects energy prices to rise.

However, Europe is no longer so susceptible to this, since the winter season is largely over.

In its monthly report published on Monday, the Bundesbank assumes that German economic output will "again noticeably decline" in the first quarter of this year. The reason for this is "that the pandemic is intensifying again due to the Omicron variant," it says in the report: In the fourth quarter of 2021, the German economy had already shrunk by 0.7 percent compared to the previous quarter.

Technically, any further decline would send the economy into recession.

"In view of the very good demand situation, GDP should pick up speed again in the spring," write the central bankers.

However, the danger of a war in Ukraine has not yet been priced in.

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