War In Ukraine Disrupts German Business Morale

The skyline with the banking district was shot on September 22, 2021 in Frankfurt, Germany. REUTERS / Kai Pfaffenbach

Berlin, March 25 -German business morale as companies worry about rising energy prices after the war in Ukraine, driver shortages, and supply chain stability, pointing out the possibility of a future recession. Slumped in March, a Friday survey showed.

The Ifo Institute for Economic Research said the business environment index for March fell from 98.5, which was revised downward in February, to 90.8. Analyst Reuters polls pointed out a March reading of 94.2.

Thomas Gitzel, Chief Economist at VP Bank Group, said:

Thursday’s announcement of the Purchasing Managers Index gave us hope that the German economy could so far absorb the economic impact of the war, but Friday’s Ifo Index “tell us not. It will do it, “Gitzel said.

“The extreme differences between situations and expectations are typical. The uncertainty of war is very high, even if it doesn’t really happen much,” said Jens-Oliver Niklasch, senior economist at Landesbank Baden-Wuerttemberg. I am saying.

Ultimately, uncertainty goes far beyond the Ukrainian war, raising questions about the sustainability of Germany’s business model, said Andreas Schuel of Decabank, Europe’s largest economy as a supplier and customer. He pointed out that he is unilaterally dependent on the country.

According to Commerzbank’s Jorg Krämer, companies are particularly afraid of risks such as the western boycott of Russian oil, which leads to market shortages and pushes up prices.

Business expectations also fell from 98.4, the sharpest plunge since the outbreak of the coronavirus pandemic, to 85.1.

At this point, two-thirds of industrial companies want to raise prices more than ever, and retailers are trying to keep up, Ifo economic expert Klaus Wohlrabe told Reuters.

“This is a domino effect,” he said.

The service department can initially be pleased with the mitigation of the COVID-19 curb, but the problem is imminent as filling the car tank becomes a burden and the family needs to reduce leisure activities. I am.

At the same time, the bailout package announced by the German government on Thursday is not close enough to cover the increased costs, Gitzel said.read more

Report by Zuzanna Szymanska, Rene Wagner, Klaus Lauer, edited by Thomas Escritt and Toby Chopra

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