German business morale improves despite virus uptick

A crowded party ship cruises over the river Main in Frankfurt on Sept 18. (AP pic)

FRANKFURT: German business confidence climbed further in September, a closely watched survey said Thursday, despite coronavirus cases notching up in Europe’s biggest economy.

The Ifo institute’s monthly barometer rose to 93.4 points from a seasonally adjusted 92.5 points in August, marking the fifth consecutive month in which sentiment rose.

The result is just below a consensus forecast of 93.5 by Factset.

“The German economy is stabilising despite rising infection numbers,” said Ifo President Clemens Fuest.

The reading has now recovered close to the level of the same month last year, when it was 94.8, suggesting a remarkable economic turnaround after economic output plummeted in the spring.

The Ifo index dived to a record low in April when Germany’s coronavirus restrictions closed factories and shops, before starting to pick up the following month as business activity gradually resumed.

Indications show industrial and construction sectors saw noticeable improvements in sentiment in September, according to the survey, although the service sector index fell as the outlook became gloomier.

“In the final quarter, there will probably be setbacks again,” said Uwe Burkert, economist at LBBW bank. “But all in all, we have so far come through the pandemic better than was feared in March or April.”

A key indicator published on Wednesday showed that consumer confidence ticked up slightly heading into October, amid a stable labour market, despite the storm clouds of further virus restrictions ahead.

Munich, the country’s third-largest city, has already announced it will make face masks compulsory in some busy outdoor spaces to combat a spike in infections, while a targeted alcohol ban is being considered.

“The easy part of the recovery is over. Both health policy and economic policy efforts must now focus on ensuring that the economic improvement continues at a satisfactory pace,” said Fritzi Koehler-Geib, economist at state-owned development bank KfW.