Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

German business morale down on supply shortages, virus fears

Published 26/07/2021, 10:39
Updated 26/07/2021, 10:40
© Reuters. FILE PHOTO: People enjoy their drinks at a terrace of Revolte bar, as cafes, bars and restaurants reopen their terraces after being closed down for months, amid the coronavirus disease (COVID-19) outbreak, in Berlin, Germany, May 21, 2021. REUTERS/Christi

© Reuters. FILE PHOTO: People enjoy their drinks at a terrace of Revolte bar, as cafes, bars and restaurants reopen their terraces after being closed down for months, amid the coronavirus disease (COVID-19) outbreak, in Berlin, Germany, May 21, 2021. REUTERS/Christi

By Kirsti Knolle and Caroline Copley

BERLIN (Reuters) - German business morale fell unexpectedly in July on continuing supply chain worries and amid rising coronavirus infections, a survey showed on Monday, the first decline since January.

The Ifo institute said its business climate index fell to 100.8 from a revised figure of 101.7 in June and versus a Reuters poll forecast of 102.1.

"Supply bottlenecks for preliminary materials and concerns regarding a renewed rise in (coronavirus) infection numbers are weighing on the German economy," Ifo President Clemens Fuest said in a statement.

Companies gave a slightly better assessment of their current situation but optimism with regard to the coming months waned.

The Ifo expectations index fell to 101.2 from 103.7 in June, while the current conditions index rose to 100.4 from 99.7.

Almost 64% of industrial firms in Europe's biggest economy complained about bottlenecks in supply chains, while 60% of wholesalers and 42.5% of retailers also reported shortages, according to the institute.

"Nerves are on edge again," said Andreas Scheuerle, economist at Dekabank. "The first drop in the Ifo business climate came faster than feared."

Events including the COVID-19 pandemic, natural disasters in China and Germany and cyber attacks have conspired to drive global supply chains towards a breaking point, threatening the flow of raw materials, parts and consumer goods.

"The expected straight-line economic recovery in the second half of 2021 is not a foregone conclusion," Bankhaus Lampe chief economist Alexander Krueger said.

Supply chain disruptions are likely to persist and economic recovery will continue to depend on the pandemic, Krueger added.

Germany's car industry - featuring powerful brands like Volkswagen (DE:VOWG_p), Daimler and BMW and accounting for an estimated 5% of the economic output and more than 800,000 jobs - this month slashed its forecast for 2021 production growth in response to the insecurities.

The flooding in western Germany two weeks ago is likely to add to the problems, and road transportation of goods has slowed significantly. In the week of July 11, as the disaster unfolded, the volume of late shipments rose by 15% from the week before, according to data from supply-chain tracking platform FourKites.

In Germany's tourism and hospitality sectors, among the worst hit by lockdowns, euphoria has also ebbed, with many fearing a fourth wave of the coronavirus, Ifo economist Klaus Wohlrabe said.

After more than two months of steady decline, COVID-19 cases have been rising since early July, due mainly to the spread of the more infectious Delta variant.

© Reuters. FILE PHOTO: People enjoy their drinks at a terrace of Revolte bar, as cafes, bars and restaurants reopen their terraces after being closed down for months, amid the coronavirus disease (COVID-19) outbreak, in Berlin, Germany, May 21, 2021. REUTERS/Christian Mang/File Photo

Roughly 60% of Germany's 83 million people have had a first shot of a COVID-19 vaccine and about half are fully vaccinated.

($1 = 0.8488 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.