Business sentiment among companies in Germany has deteriorated further recently. According to the Ifo Institute, the business climate index dropped to 84.4 points in April, marking a decline from 86.4 points recorded in February. This figure represents the lowest reading since May 2020. Companies are currently expressing considerable pessimism about the coming months and view their current operating conditions unfavorably. The ongoing crisis related to the conflict in Iran is cited as dealing a significant blow to the German economy.
Across various sectors, the decline in sentiment was noticeable. In the manufacturing industry, the business climate worsened due to markedly pessimistic expectations, particularly within the chemical sector. However, companies reported a slightly better assessment of their current situation, though they increasingly noted supply chain bottlenecks for precursor materials.
The service sector also saw a sharp drop in the index, as the slump in expectations continued. Current operational conditions were also judged less favorably. Logistics, in particular, remains under pressure, with prospects described as bleak.
In the retail trade, the business climate took a significant downward turn. Retailers revised both their expectations and assessments of their current status sharply downwards. They expressed particular concern that inflationary pressures might cause consumers to curtail spending more drastically.
Finally, the construction sector experienced a steep decline in business sentiment, with expectations dropping by almost 10 points. Companies reported being considerably less satisfied with their current operations, suggesting that hopes for an economic recovery are currently diminished.