German business sentiment falls on coronavirus angst

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German business morale fell for the first time in six months in October, weighed down by companies’ concerns about rising coronavirus infection rates that are making them more sceptical about the coming months, a survey showed on Monday.

The Ifo institute said its business climate index fell to 92.7 from a downwardly revised 93.2 in September. A Reuters poll had foreseen a decline to 93.0.

“Companies are considerably more sceptical regarding developments over the coming months,” Ifo President Clemens Fuest said in a statement. “In view of rising infection numbers, German business is becoming increasingly worried.”

The German economy contracted by 9.7% in the second quarter as household spending, company investments and trade collapsed at the height of the pandemic.

An easing of lockdown measures, coupled with an unprecedented array of rescue and stimulus packages, led to a robust recovery in the third quarter, but a spike in new coronavirus cases has caused concern activity could slow again.

“After a strong third quarter for the German economy, the outlook for the final quarter is not too rosy for the time being,” said Uwe Burkert, economist at LBBW.

Germany’s leading economic research institutes forecast earlier this month that the economy will recover more slowly from the coronavirus pandemic than originally predicted.

The institutes expect the economy will shrink by about 5.4% in 2020, a bigger decline than the 4.2% they forecast in April.

Recent German data has been mixed.

Consumer morale fell heading into November as fears about a second coronavirus wave that is hitting the economy made Germans less willing to open their wallets, a survey showed last Thursday.

A separate survey on Friday showed private sector activity grew for the fourth month running in October, but while the manufacturing sector expanded at a faster rate, services activity shrank, suggesting the economy is operating at two speeds.

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