The mood in German business has turned downwards again. In March, the ifo business climate index fell to 86.4 from 88.4 the previous month.
The index measures the mood among around 9,000 German companies every month and is considered one of the most important indicators of Europe's largest economy. This time, it is particularly the companies' expectations for the coming months that are dragging it down.
It is yet another clear sign that the recovery many had hoped for at the beginning of the year is losing momentum.
According to ifo, it is particularly the uncertainty in the global economy that is affecting companies' expectations. The institute points out that the current developments in the Middle East play a central role and have dampened optimism in the German economy.
Tourism and logistics under pressure
The decline is widespread, but for companies in the Fehmarn corridor, it is particularly noteworthy that ifo highlights tourism and logistics as some of the hardest-hit areas.
In the service sector, companies assess the current situation slightly better, but expectations for the future have fallen sharply. It is a classic warning of lower activity in the coming months.
At the same time, the industry is losing ground again after a short period of progress, and especially energy-intensive companies are under pressure. The construction industry is also experiencing a significant deterioration in expectations, while trade is weighed down by continued uncertainty about inflation and consumption.
Follows the same pattern as ZEW collapse
The ifo figures follow a significant drop in the ZEW indicator earlier in the week.
The ZEW indicator measures expectations for the economy among financial analysts and investors and is an important gauge of economic development in the coming months.
In March, the indicator fell to minus 0.5 after being almost 60 points higher the previous month. Thus, optimism among investors and analysts has almost disappeared in one month.
Both measurements point in the same direction: unrest in the Middle East is pushing energy prices and inflation expectations and creating new uncertainty about the strength of the German recovery.
