German business mood recovers further in May

The temper among German agencies improved in May, a key survey posted Monday confirmed, as Europe’s biggest economy weathered the first impacts of the Russian invasion of Ukraine.

“The German financial system has verified itself resilient in the face of inflation concerns, material bottlenecks, and the struggle in Ukraine,” said Clemens Fuest, president of the Ifo assume tank.

The closely watched index rose to 93 points from 91.9 points in April, after plunging in March following the Russian invasion of Ukraine.

Companies were more positive about the current business conditions, with the indicator rising to 99.5 points from 97.3 points.

By contrast, the outlook for the economy remained shrouded in doubt, with businesses’ expectations for the future only rising marginally to 86.9 points from 86.8 points.

High levels of inflation have unsettled businesses, with consumer prices rising at a rate of 7.4 percent in Germany in April.

The surge has been driven by the rising price of energy following the outbreak of the war in Ukraine.

Germany, like many European countries, is highly reliant on Russian imports to meet its energy needs, particularly for deliveries of natural gas.

Further limits to supply or a complete stop could have severe consequences for industry, potentially bringing production lines to a stop.

The German business temper was “tons more solid for the reason that Russian invasion of Ukraine” than following the beginning of the coronavirus pandemic, in keeping with Fritzi Koehler-Geib, the chief economist at public lender KfW.

But a giant development turned into “out of sight”, she said, with strength prices set to stay high and strict coronavirus lockdowns in China causing “repeated disruptions in international deliver chains”.