German companies are facing a decline in confidence, as revealed by the latest business climate index from the Munich-based Ifo Institute. The index fell to 84.7 points in December, down from 85.6 in November, marking its lowest level since May 2020. This decline has been attributed primarily to more pessimistic future expectations, although current business conditions were viewed slightly more favourably by respondents. The Ifo Institute described the ongoing weakness of the German economy as "chronic."
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The manufacturing sector experienced a notable drop in sentiment. Companies reported less satisfaction with current operations and expressed significantly lower expectations for the months ahead. The industry's order books have continued to shrink, prompting plans for production cuts.
In retail, the upward momentum observed over the last two months has stalled. Businesses reported declining satisfaction with current trade and expressed growing pessimism about the future. Wholesale operations were identified as a significant driver of this downturn, although dissatisfaction extended to other areas of retail as well.
The service sector also showed a dip in confidence, with companies expressing greater scepticism about the future despite a marginal improvement in their assessment of present conditions. While the hospitality sector reported positive results from Christmas-related business, the transport and logistics industry shared a far gloomier outlook for the months ahead.
In contrast, the construction industry demonstrated some resilience. Businesses in this sector assessed current conditions more positively, although their expectations for the future have become more cautious.
The Ifo Institute's findings underscore the persistent challenges faced by the German economy, with weakened consumer demand, inflationary pressures, and increased competition affecting multiple industries. As 2024 comes to a close, businesses across sectors continue to navigate an uncertain and competitive landscape.
Source: www.moebelmarkt.de