News from the German economy: Angela Merkel faces business confidence nightmare in the face of new wave of Covid | Politics | News


Munich’s Ifo Institute announced that its business climate index fell for the first time in six months, from its highest level in decades. The measure fell from 101.7 in June to 100.8 in July, reflecting lower expectations for the next six months. A Reuters survey of economists expected business confidence in Europe’s largest economy to continue to rise to 102.1.

Ifo Chairman Clemens Fuest said: “Supply bottlenecks and concerns over the further rise in the number of infections are weighing on the German economy.”

Confidence collapsed in service, manufacturing and retail businesses, with construction the only sector where the outlook showed signs of improvement.

Mr Fuest said German service companies “continue to expect higher sales figures, although they are not as strong as the month before.”

But he warned that manufacturing was hampered by the “scarcity of intermediate products.”

The Ifo chief added that the shortage “is becoming more and more critical, and more and more companies are complaining about a lack of qualified workers”.

The unexpected forecast contradicted a more optimistic reading of last week’s survey of German purchasing managers.

The PMI reading hit an all-time high despite widespread concerns over supply issues.

German manufacturing companies have struggled to meet growing global demand due to shortages of materials and components.

It was said that the scarcity of items including semiconductors, metals, plastics and wood, as well as bottlenecks in container shipping, had hampered their business.

Despite the disaster, the German economy is expected to rebound this summer after most restrictions on coronaviruses were lifted in May.

COVID-19 infections have collapsed and now more than half of adults have received two doses of a vaccine.

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But some economists are more pessimistic about the threat of an increase in infections and future lockdowns.

Jorg Kramer, chief economist at Commerzbank, said: “Ultimately these will indeed be subject to application, although we don’t expect another undifferentiated lockdown.”

The coronavirus infection rate remains stable in Germany, with just 958 new infections reported by the country’s Robert Koch Institute on Monday.

But that means the seven-day incidence rate fell to 14.3 per 100,000 people, from 4.9 on July 6.

The figure has risen for three consecutive weeks as Europe prepares for the Delta variant to become the dominant strain by August.

Helge Braune, the main assistant to German Chancellor Angela Merkel, has warned that cases could reach 100,000 a day by the end of September if they continue to rise at the current rate.


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