Grim mood grips German managers during November's partial lockdown

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
·2 min read
BERLIN, GERMANY - NOVEMBER 23: People wearing protective face masks walk past Christmas display windows of KaDeWe department store during the second wave of the coronavirus pandemic on November 23, 2020 in Berlin, Germany. The Christmas season is beginning muted in Berlin, with traditional Christmas markets that would normally open today all cancelled. Germany is in the midst of November semi-lockdown measures that political leaders will likely be extended until December 20 as authorities continue to struggle to bring down coronavirus infection rates.  (Photo by Sean Gallup/Getty Images)
People wearing protective face masks walk past Christmas display windows of KaDeWe department store during the second wave of the coronavirus pandemic on November 23, 2020 in Berlin, Germany. Photo: Sean Gallup/Getty Images

Germany’s prominent index on business morale today reveals a pessimistic mood among the country’s managers, despite recent news of progress on COVID-19 vaccine development and health ministry predictions that vaccination will begin in December.

The Business Climate Index from the Munich-based Ifo economic institute fell to 90.7 points in November from 92.5 points in October. That is the second month in a row when morale decreased.

“Business uncertainty has increased,” said Ifo president Clemens Fuest. “The second Corona wave interrupted the recovery of the German economy.”

READ MORE: Bundesbank says economic recovery interrupted by pandemic resurgence

The drop in morale stems mainly from the second wave of coronavirus that has swept through Europe’s largest economy, and led to a partial lockdown of the hospitality, entertainment, and tourism sectors this month.

It is expected that chancellor Angela Merkel and the state leaders will agree at a meeting this week to extend the lockdown until around 20 December.

The business climate indicator fell back into negative territory for the first time since June, and, perhaps unsurprisingly given the shutdown, indicators in the hotel and hospitality sector have “literally crashed,” according to the Ifo.

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The Ifo found that expectations in the manufacturing sector were the “bright spot” this month, with companies expressing a more positive view of their current situation thanks to a rise in orders.

They too are significantly less hopeful for the coming months. Retail and construction sectors offer a similar picture.

While the German economy bounced back in the last quarter —showing 8.5% growth — a second dip seems inevitable in the final quarter of the year, because of the extended restriction measures. The economy is forecast to shrink by more than 5% overall in 2020.

READ MORE: Eurozone business activity plunges as lockdowns bite

The recent IHS Markit PMI indexes showed that eurozone business activity plunged into a drastic decline in November.

Germany’s manufacturing sector managed to buoy the economy however, and IHS Markit said it expects that the manufacturing sector’s resilience could ensure a shallower downturn than in the first half of the year.

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