Daily Management Review

German Business Morale Pushed To Record Low Due To Economic Hit Of Covid-19


German Business Morale Pushed To Record Low Due To Economic Hit Of Covid-19
The most dramatic fall on record for German business morale was recorded by the German economy in April as the largest European economy touched its lowest reading since reunification because of the severe economic impact of the novel coronavirus pandemic on the country’s economy.
According to data from the April survey of the Ifo institute which was released on Friday, compared to a downwardly revised number of 85.9 in March, the business climate index in Germany slumped to 74.3 for April. A Reuters poll of economists had pointed to a fall to 80.0.
"Sentiment at German companies is catastrophic," Ifo President Clemens Fuest said in a statement. "The coronavirus crisis is striking the German economy with full fury."
At the earliest, there can be signs of recovery for the German economy starting only mid year, said an Ifo economist, who also added that any economic recovery form a recession because of the novel coronavirus pandemic will most likely not present a V-shaped curve but will be very gradual.
The German economy is in a severe recession, said the country’s central bank, the Bundesbank, on Monday. In response to the economic damage, the German government has already announced a 750-billion-euro ($806.03 billion) stimulus package.
According to another survey published on Thursday, there has been a deepening of the private sector recession of Germany in April primarily because of fall in output in the services and manufacturing sector companies because of the lock downs and the stay at home orders imposed to curb the spread of the deadly coronavirus pandemic.
"As dreadful as today's Ifo numbers are, the bigger concern for any growth forecasts is the fact that the easing of the lockdown measures takes somewhat longer and is more gradual than initially expected," said ING economist Carsten Brzeski.
Germans were urged to show endurance and discipline to get through the coronavirus pandemic by Chancellor Angela Merkel on Thursday. She also noted that the pandemic is "still at the beginning", and therefore called for a bigger European Union budget which could support a broader economic revival in the bloc.
Starting this week, production at some factories have been resumed by German carmakers following the easing of restrictions designed to contain the coronavirus outbreak. While some shops were also allowed to open, strict social distancing rules remain in place.
The IAB labour market research institute said on Friday that unemployment in Germany is set to rise by around 520,000 and surpass 3 million by the end of the year because of continued strain on the economy by the coronavirus pandemic as well as pressure from more people going out off work.