Summary
Business confidence in Germany is at an all-time low. The business climate index, as surveyed by the Munich-based Ifo Institute, has reached the lowest result measured since the survey began in 1991. Even worse is that, according to Ifo’s president Hans W. Sinn, the bottom of the downturn has not yet been reached. That’s the bad part of the news. Here comes the good news: Although the part of the survey which measures current conditions continues to decline, the part of the survey measuring optimism for the next six months has increased steadily since the beginning of the year.
Analysis
Business confidence in Germany is at an all-time low. The business climate index, as surveyed by the Munich-based Ifo Institute, has reached the lowest result measured since the survey began in 1991. Even worse is that, according to Ifo’s president Hans W. Sinn, the bottom of the downturn has not yet been reached. That’s the bad part of the news. Here comes the good news: Although the part of the survey which measures current conditions continues to decline, the part of the survey measuring optimism for the next six months has increased steadily since the beginning of the year. Therefore, although companies are generally not satisfied with the current situation, they do not seem to think that this situation will continue indefinitely. Furthermore, it seems that companies have learned some lessons from past downturns and are already preparing for the coming upswing. The Daimler investment by the Emirate of Abu Dhabi might have been the starting shot. Another positive sign was given recently by the state-owned bank WestLB, one of the first hit by the subprime crisis, which announced a 2008 profit of 100 million EUR (approx. USD 126 million).
