Brandenburg Gate in Berlin, Germany

Germany Business Confidence June 2020

Germany: Business confidence improves but remains in negative territory in June

The business confidence indicator came in at 86.2 in June, up from May’s 79.7. As such, the index remained below the 100-threshold separating pessimism from optimism among businesses. This marked the strongest increase on record and came on the back of improved views on the current and expected business climate due the government’s gradual lifting of lockdown measures.

Manufacturing firms’ views on the expected business climate jumped, while service providers’ outlook improved steeply as well. Expectations among firms in the trade and constructions sectors also improved notably. That said, most sectors were still pessimistic regarding the current business climate, as it will likely take some time for the economy to recover.

Carsten Brzeski, chief Eurozone economist at ING, commented: “The problem with soft indicators these days is that they give a good impression of the relative change but should be taken with a huge pinch of salt when it comes to their predictive power of actual GDP growth outcomes. […] Still, today’s Ifo index echoes more real-time signals that economic and social activity has started to pick up significantly since the first lifting of the lockdown measures in late April. […] However, it is currently still impossible to measure the more permanent damage the crisis has caused and what its impact will be on future growth.”

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