German business activity increased in December
2022.12.19 07:03
German business activity increased in December
Budrigannews.com – According to a business survey that is closely watched, German business confidence rose surprisingly strongly in December as the risk of gas rationing decreased and supply chain bottlenecks continued to ease.
According to the research institute Ifo, both of the two sub-indices increased, and its value increased to 88.6 from an upwardly revised 86.4 in November. The rose to 94.4 from 93.2, its first rise in seven months, after falling to 80.2 for two years.
The think-tank said in a release that went along with its report, “German business is entering the holiday season with a sense of hope.”
A month after the German government agreed on a formula for gas pricing this winter that still implies a heavy level of subsidy for industrial users, Ifo reported a “significant increase in confidence in “nearly all branches of industry”” and a broad decline in uncertainty.
A further decrease in order backlogs was the icing on the cake: When Russia invaded Ukraine in February, Europe’s manufacturing engine had historically high backlog levels. Because of this, the decline in actual output this year has been relatively mild. However, a number of well-known German businesses are currently fulfilling their existing orders more quickly than they are acquiring new ones.
Ifo also stated that its measure of confidence in the retail industry reached its highest level since June, with more businesses expressing optimism rather than pessimism about the future during the month. A clear majority of respondents stated that things were getting worse rather than better only in the construction industry.
Investigators stayed watchful about sounding the all-unmistakable.
In a note to clients, ING analyst Carsten Brzeski stated, “The fact that the economy has avoided the worst does not automatically mean that the only way is up from here.” On the contrary, the disadvantages continue to outweigh the benefits: Since February, there has been a decline in new orders, and inventory levels have started to rise again, which is never good news for industrial production in the future.
Additionally, Brzeski cautioned that the subsequent phase of the pandemic in China is likely to present additional obstacles for an economy that is severely dependent on export markets and global supply chains that are fully operational. Additionally, as a result of the government’s energy subsidies, underlying prices are only gradually reflected in final prices, putting an additional strain on Europe’s largest economy into the coming year.
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