Crisis not so dangerous?

Author: Konrad Potocki

Although most experts are predicting difficult months for the European economy, there has been an improvement in business sentiment in Germany.

This is a big surprise, as previously, the indices of the so-called #IFO Business Climate Index had been falling regularly. Although the value of the index rose slightly – 88.6 points in December, compared to 86.4 points in November – this alone surprised economists.

In practice, this could translate into a revival of supply chains across the continent, as the German economy tied together suppliers from across Europe.

The #IFO business climate index is Germany’s most highly regarded tool for gauging economic sentiment. It is based on 9,000 surveys targeting companies in the manufacturing, service, retail and construction sectors. As Clemens Fuest (President of the #IFO Institute), reported, economic sentiment improved in almost all industries, with the most significant improvement in manufacturing.

The sector’s sentiment index was -5.6 points in December this year, but had fallen to -11.5 points only a month earlier. In the retail sector, on the other hand, the #IFO index reached its best level since June this year at -20 points.

These results do not yet signify a change in economic trends, but they give hope that the economic slowdown will take a milder form in Europe. All the more so as the moderate optimism of entrepreneurs is confirmed by statistical data. According to data from the Statistisches Bundesamt, Destatis (Federal Statistical Office) for the third quarter of 2022, German GDP grew by 0.03% compared to the previous quarter and by 1.1% compared to a year earlier. Employment also increased slightly, although it declined by 0.07% in trade and transport, for example, which may indicate less demand for transport.