The confidence of German entrepreneurs in the economy unexpectedly rose slightly in February. This was reported by the Ifo research institute. It should be noted that the measurement was taken on Monday before the price fall on the European stock exchanges. The new coronavirus in particular is keeping an eye on things.
The confidence index of Ifo was 96.1 against 96 in January. Economists generally calculated at a level of 95.3.
The fact that confidence has risen slightly may have to do with the efforts that have been made to get the virus under control. Companies previously lowered their profit forecasts due to the epidemic. The virus also ensures that factories remained closed and limited demand.
Germany, the largest economy in the eurozone, saw its economic growth stagnate in the last three months of 2019. It is widely expected that this quarter will again see growth.
ING economists, who speak of a surprisingly stable outcome, also guard against too much optimism. “As the Ifo index has responded more often to adverse global events with a delay of one or two months, today’s reading should be grained with salt,” ING said.
The bank also points to the unexpected fall in confidence a month earlier. According to ING, the industry remains the Achilles heel of Germany. The low point has not yet been reached. “It even seems more and more that things in the manufacturing industry get worse before they improve.”
Exports to China account for around 6 percent of total German exports. Weaker Chinese demand, according to ING, has left its mark on the economy and can accentuate the problems in the car industry. The bank also points to the problems in the supply chain. The longer the disruptions in the supply chain, the more German companies try to find alternatives that can eventually, at least temporarily, drive up prices.
ING also pointed to the impact on the tourism sector. The bank also points out the problems with the virus in northern Italy. The northern part of Italy is the industrial backbone of the country. The problems there can further disrupt the German economy.