German business confidence plummets

The business climate in Europe’s biggest economy deteriorated in March, German survey data showed on Friday, amid fears of soaring energy prices and worsening supply chain problems. supplies due to the invasion of Ukraine.

“The war in Ukraine is causing the Ifo business climate index to collapse,” the Munich-based institute said as its closely watched indicator plunged to 90.8 points from 98.5 in February.

“Businesses in Germany are expecting tough times,” Ifo President Clemens Fuest said, noting that the indicator’s “historic” 13.3-point drop surpassed even the 11-point drop, 8 points at the start of the pandemic two years ago.

Fuest said in a statement that the business climate in flagship manufacturing industries has fallen more sharply than ever, with “optimism giving way to clear pessimism” in the business outlook as well.

Bottlenecks in the supply of raw materials and components were already weighing heavily on Europe’s largest economy, which derives much of its strength from a heavily export-driven sector.

Moscow’s invasion of Ukraine has also pushed up energy prices, with Germany in particular heavily dependent on Russia for natural gas supplies.

Jens-Oliver Niklasch, senior economist at LBBW bank, said the claims figures were broadly in line with forecasts.

“Insecurity is very high due to the war,” he said, noting that economic growth projections for Germany had been revised downwards in recent days.

“We have to prepare for a tough second quarter. The fog of war won’t allow us to see much beyond that.

The IfW said last week that Russia’s war on Ukraine would have a big impact on the German economy, cutting its 2022 growth forecast by nearly half to 2.1%.

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