Despite headwinds, German company morale brightens slightly

Ifo Chairman Clemens Fuerst said companies’ forecasts were “a little less pessimistic”.

However, he added, “The German economy is stabilizing at a low level.”

Germany, which has traditionally been a key driver of growth for the 20-member eurozone, has been in crisis since Russia’s invasion of Ukraine in 2022 caused food and energy costs to soar. Dependence on heavy industry in particular puts Germany at a disadvantage.

The resulting slowdown in the industrial sector and the weakness of global trading partners, especially China, have plunged the economy into a slump, with production declining by 0.3% last year.

An IFO survey in February found that morale in the service and construction industries had improved, but the mood in manufacturing and trading had worsened.

ING economist Carsten Brzeski said the survey showed “little hope of an imminent recovery” despite a slight improvement in overall data, with production expected to contract in the first quarter of this year. did.

This would result in two consecutive quarters of negative growth, and Germany would be plunged into a technological recession.

This week, the government lowered its growth forecast for 2024 to just 0.2% from the previously expected 1.3%, warning that the economy was in “rough waters”.

But Fritzi Köhler Geib, chief economist at public financial institution KfW, struck a more optimistic tone, saying there were “good reasons” for the poll numbers to start improving.

“The economic outlook is better than business forecasts, which remain gloomy,” he said.

“Rising real wages, expected stable employment levels and a recovery in global trade are encouraging signs and should gradually lift the economy from spring onwards.”

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