The mood in the boardrooms of German companies brightened in February for the fourth month in a row. The Ifo business climate index rose to 91.1 points from 90.1 points in the previous month, as the Munich-based Ifo Institute announced on Wednesday in its survey of around 9000,<> executives.
Economists surveyed by the news agency Reuters had expected the increase to 91.2 points. "The German economy is gradually working its way out of its weak phase," said Ifo President Clemens Fuest. Although companies were more dissatisfied with current business than in January, expectations for the next six months increased.
Recently, there have been mixed signals for the economy. The purchasing managers' index for the private sector, industry and service providers together rose for the fourth month in a row in February and signalled growth for the first time in eight months.
However, the Bundesbank warns of a winter recession in Germany. After shrinking by 0.2 percent at the end of 2022, the economy could also lose momentum in the current quarter. With two quarters in a row with a declining gross domestic product (GDP), experts speak of recession.
What do economists say about the current Ifo business climate index? The news agency Reuters has caught up with three votes from bank economists: Ulrich Wortberg of Helaba, for example, classifies the level of the sentiment barometer as still low in the long-term average, which should be seen as a warning against too much economic optimism. The first quarter in particular could still be characterised by weak GDP development. According to Wortberg, however, the continued rise in business expectations suggests an improved economic momentum in the course of the year. The German economy is unlikely to slide into recession. "With regard to the ECB, the expectation should be confirmed that the cycle of interest rate hikes is not over even after the March meeting," says Wortberg.
According to Jens-Oliver Niklasch of LBBW, the rise in sentiment fits into the picture of the indicators, most of which are currently recovering. At the same time, the small decline in the situation index shows that the economic engine has occasional misfires. In summary, an improvement in the economy can be expected in the trend, but minor setbacks are to be expected. In particular, the construction sector and parts of the automotive industry could prove to be spoilsport in the coming months.
According to Andreas Scheuerle of Dekabank, the economy is many times better off today than had been feared in 2022, thanks to government aid measures, courageous gas procurement and the mild winter. Now the far too pessimistic expectations have adapted to the real circumstances. Scheuerle, however, does not see them as a harbinger of a stormy recovery.