German business sentiment holds steady despite coronavirus
By Michele Maatouk
Date: Monday 24 Feb 2020
(Sharecast News) - German business confidence held more or less steady in February, according to a widely-followed survey released on Monday.
The Ifo business climate index nudged up to 96.1 from an upwardly-revised 96.0 in January, beating expectations for a reading of 95.3.
Meanwhile, the current assessment index slipped to 98.9 from 99.2 and the expectations gauge ticked up to 93.4 from 92.9.
The sub-index for manufacturing improved to -1.3 from -1.6, while the index for the services sector printed at 17.3 versus 18.8. The gauge for the trade sector fell to 1.0 from 2.2 while the construction sub-index edged down to 13.1 from 13.5.
Ifo Institute president Clement Fuest said: "Although companies assessed their current situation as a little worse, they are less pessimistic about the next six months. The German economy seems unaffected by developments surrounding the coronavirus."
Oxford Economics said: "After the positive surprise given by the eurozone purchasing managers' index (PMI) data last week, today's German Ifo index numbers also beat expectations, edging up despite the worsening news on the coronavirus outbreak.
"The apparent resilience of the domestic economy to the outbreak is a positive. But the resistance of real activity surveys issued this month to the impact of the virus only reflects the reality that it's too soon to see significant effects from the outbreak spilling over into German and eurozone activity.
"With the virus now at the gates of Europe, with the spate of new cases reported in Italy, survey data are very likely to deteriorate rapidly in coming months.
"A worsening of hard eurozone data is likely to follow since the fragility of global supply chains means even small disruptions in China's output could still have large repercussions for Europe down the line.
"For now, we continue to believe that the epidemic will be contained to the first half of 2020, so the German and eurozone industrial recovery will not be derailed but only delayed until the second half of the year. Of course, this outlook could deteriorate rapidly should the virus, now spreading to developed countries, fails to be contained."
Capital Economics said: "The small increase in the Ifo business climate index in February will be a relief for those braced for a big hit from the coronavirus. However, the index is still below its level in December and remains consistent with our view that the economy is most likely to record zero growth again in Q1."
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