The Ifo Business Climate Index for industry and trade in Germany fell in March to 110.7 points from 111.3 points after four months reaching highs. This index is based on ca. 7,000 monthly survey responses from firms in manufacturing, construction, wholesaling and retailing.
“The crisis of the emerging economies and the events in Crimea are impacting the confidence of German firms,” says Hans-Werner Sinn, president of Munich’s Ifo economic research institute.
The figures show that companies are expressing less confidence in future business developments, where the index decreased from 108.3 in February to 106.4 in March. Nevertheless, the index for the current situation increased from 114.4 to 115.2 points, getting close to 2012 figures.
“The Ukraine crisis and a somewhat subdued growth outlook for China are only the most obvious and visible reasons for the drop in Germany’s business climate. There could also be additional, and lasting, domestic and Eurozone related reasons,” says Michael Wohlgemuth, director of think tank Open Europe Berlin.
The Ifo’s data follow the Markit survey published yesterday, which showed that German activity fell to a four-month low, though it remained in expansion. From February’s 33-month high of 56.4, Markit’s preliminary composite Purchasing Managers’ Index (PMI) registered 55.0 in March.
“The German business community is getting more and more disenchanted with the first 100 days of the grand coalition’s work. The introduction of universal minimum wages and early retirement schemes – a rollback of the reforms that made Germany globally competitive over the last decade – is increasingly worrying German business people. In addition, the ill-conceived German energy policy (turning towards renewables at a staggering pace) is bound to increase energy bills for firms and households even more. And finally, many business leaders are still concerned about the Euro-banking crisis. The upcoming stress-tests might reveal that there are still many ‘Zombie banks’ around in the Eurozone and that the Euro-crisis is not over, after all,” concludes Prof. Dr. Wohlgemuth.
However, most of German newspapers as Frankfurter Allgemeine, Die Welt, Süddeutsche Zeitung or Die Zeit point out the Crimea crisis and the announcement of EU sanctions to Russia as the main causes of this drop in the Business Climate Index of Munich’s Economic Research Institute.