German business morale hits three-year high on re-openings

FRANKFURT (AFP) – German business confidence rose to a near three-year high in June, a key survey showed yesterday, buoyed by re-openings and falling coronavirus infection rates in Europe’s top economy.

The Munich-based Ifo institute’s monthly confidence barometer, based on a survey of 9,000 companies, climbed to 101.8 points from 99.2 in May.

The reading was slightly better than analysts had predicted and reached its highest level since November 2018.

“The German economy is shaking off the coronavirus crisis,” said Ifo president Clemens Fuest.

Businesses were both more optimistic about their current situation and about the outlook for the second half of the year, the survey found.

People walk along the main shopping street behind the closed gate of an abandoned shopping centre during a COVID-19 lockdown in Essen, Germany. PHOTO: AP

The services industry was particularly upbeat as hotels and restaurants stir back to life after months of shutdowns, while the retail sector recorded the largest jump in sentiment since German reunification in 1990.

In manufacturing and construction the sunny mood was clouded by ongoing production bottlenecks blamed on shortages of key supplies including semiconductors and timber.

“The general outlook for the German economy has improved,” said ING bank economist
Carsten Brzeski.

“The vaccination programme has picked up speed and with currently more than 50 per cent of the population having had a first jab, the reopening of the economy has gained momentum,” he said.

“New variants of the virus, however, could still spoil the reopening party.”

The pandemic-induced downturn saw the German economy shrink by 4.7 per cent in 2020.

But the export powerhouse is expected to bounce back strongly, with Economy Minister Peter Altmaier forecasting up to four-per-cent growth in 2021.