May 26, 2023
Sentiment in the German economy has suffered a setback. The ifo Business Climate Index fell to 91.7 points in May, after 93.4 points (seasonally adjusted) in April. This marks the first decline after six increases in a row. Driving this development are the significantly more pessimistic expectations. Managers are somewhat less satisfied with their current situation. German companies are skeptical about the upcoming summer.
In manufacturing, the business climate was much worse, with expectations seeing a particularly steep decline. This was the largest decrease since March 2022 after the start of the war in Ukraine. The deterioration in expectations can be seen in nearly all industries. Managers also evaluated the current situation as less positive and incoming orders fell.
The index in the service sector remained virtually unchanged. Companies were more satisfied with their current business situation, but were more pessimistic regarding the coming months.
The trade sector index saw a major decline. The indicator of the current situation has returned to negative territory after five months and skepticism regarding expectations made a marked increase. Sentiment deteriorated especially in wholesale.
In construction, the Business Climate Index fell due to worse assessments of the current situation. Expectations remain as pessimistic as they were in the previous month.
Source: ifo Institute
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