Business confidence in Germany unexpectedly rose in April as companies became less pessimistic after the economy appeared to withstand the initial shock of the war in Ukraine, a survey showed.
The Munich Institute for Economic Research, or Ifo, reported that its business climate index rose slightly to 91.8 points in April from 90.8 in March. Analysts had expected a reading of 89.1 points.
Economists said the slight increase in the Ifo survey did not at all indicate a turn to optimism.
The general climate is no different from a month ago due to the war in Ukraine. Companies are still in a bad mood, especially when looking to the future,” said Alexander Krueger, chief economist at bank Hauck Aufhaeuser Lampe.
Joerg Kraemer, chief economist at Commerzbank, mentioned that the war in Ukraine and a possible embargo on energy imports from Russia remain a major concern for companies.
According to the report, the index in the manufacturing sector increased again after the fall it suffered the previous month, after going from -3.6 to -1.0 points.
“The reason was the increase in the expectations indicator. Companies are a little less pessimistic for the coming months. However, they are considerably less satisfied with the current situation,” the report states.
The services sector was the one that registered the largest increase, standing at 0.8 in March and reaching 5.4 this month.
“Service providers are much more satisfied with their current business. In addition, they look at the coming months with less pessimism, ”said the institute.
However, the commerce sector decreased 1.3 points from -12 to -13.3 today, the institute mentioned that the result was due to a worse assessment of the current situation.
Despite the slight increase, the construction sector fell to its lowest level since 2010 from -12.3 to -20. “Business in this sector is mainly hampered by bottlenecks in the supply of materials,” the Ifo said.
The ifo business climate is based on 9,000 monthly responses from companies in industry, the service sector, trade and construction. Companies are asked to assess the current business situation and their expectations for the next six months.
Raises inflation forecast for 2022
The German government will raise its inflation forecast for this year to 6.1% from 3.3% it forecast in January, according to a government document seen by Reuters.
Berlin, which is due to present its spring economic forecasts tomorrow, considers that the increase in consumer prices will be reduced to 2.8% until 2023, according to the text.
Germany’s ruling coalition last month announced relief measures worth 16 billion euros ($17.2 billion) to help consumers cope with high energy costs and reduce dependence on Russian gas.
A survey published last week found that only one in 10 German consumers dipped into their savings to deal with inflation. Especially those who are younger, that is between 25 and 34 years old, who responded that they are saving less or that they have resorted to taking out loans to pay their bills.