ifo Business Climate Eastern Germany: Massive Collapse (March 2020)
In March, the ifo business climate for eastern Germany cooled off heavily. The ifo Business Climate Index for the entire regional economy fell from 99.4 to 89.7 points, in line with the figure for the whole of Germany. Both the assessments of the current situation and the business expectations of the eastern German respondents surveyed saw a steep drop. Overall, the outlook declined even more strongly than the assessments of current business.
It should be noted that the data was collected in the middle of the month, i.e., before the introduction of the massive restrictions to contain the coronavirus pandemic. This means that assessments of the current situation in particular are likely to have deteriorated even further by now.
In eastern German manufacturing, there was a massive fall in sentiment in March, primarily because of a sizable downward revision to business expectations. However, at the time of the survey, participating companies assessed their current business situation as only slightly worse than in the previous month.
The Business Climate Index fell furthest in the eastern German service sector. Service providers revised their assessments in both subindices significantly downward.
The mood in eastern German trade also saw a dramatic fall. Here, too, this development was driven by a sharp deterioration in business expectations; assessments of the current situation, meanwhile, remained comparatively high at the time of the surveys, falling only slightly compared with the previous month.
In eastern German construction, there was also a definite cooling off in the business climate. However, this sector showed the least pronounced decline due to an improved assessment of current business. However, the companies surveyed revised their outlook for the coming six months emphatically downward.
Joachim Ragnitz and Marcel Thum
Executive Directors, Dresden Branch of the ifo Institute
Link
