German Ifo index falls again in November

German business sentiment deteriorated in November for the second month in a row, dented by the second Covid-19 wave, according to a survey released by the Ifo Institute on Tuesday.

The business climate index fell to 90.7 from a downwardly-revised 92.5 in October, meeting economists’ expectations.

Meanwhile, the current situation index printed at 90.0 in November compared to 90.4 a month earlier, while the expectations index declined to 91.5 from 94.7.

The manufacturing index rose to 3.5 from 1.5, while the service sector gauge fell to -3.1 from 3.8. The trade index declined to -4.0 from -0.2 and the gauge for construction came in at -0.1 in November from 0.3 the month before.

Ifo president Clement Fuest said: "Business uncertainty has risen. The second wave of coronavirus has interrupted Germany’s economic recovery."

Andrew Kenningham, chief Europe economist at Capital Economics, said: "The small decline in the Ifo business climate index for November confirms that the German economy is losing momentum but also that it is holding up much better than many other countries. We suspect that GDP will contract only slightly in the final quarter of the year, before rebounding by Q2 next year."

He noted that the fall in the headline index was driven by sharp reversal of the services component and a decline in wholesale and retail trade, whereas the manufacturing index rose for a seventh consecutive month.

"This is consistent with the message from the Markit PMIs published yesterday which suggested that the manufacturing sector was booming," he added.