German business optimism climbs again in July

Jill Petzinger
Germany Correspondent, Yahoo Finance UK
A miller from Rubinmühle Vogtland GmbH monitors a flaking roller mill in Saxony's largest oat mill. Photo: Jan Woitas/picture alliance via Getty Images

Companies in Germany are feeling increasingly optimistic about the coming months, according to the latest survey from the Munich-based IFO Institute for Economic Research.

The IFO’s Business Climate Index climbed to 90.5 in July, from 86.3 in June, as Europe’s largest economy expects to start recovering from the effects of coronavirus. The business sentiment reading has now climbed for the third month in a row.

“The German economy is recovering step by step,” said IFO President Clemens Fuest in a statement.

Germany’s federal statistics office will publish the preliminary GDP figures for the second quarter later this week, which will reflect the fallout from the nationwide social and business shutdowns in April and May.

Germany’s federal economy minister Peter Altmaier said earlier this month that he expects the country’s economy, currently in recession, to start picking up again from October “at the latest.”

“All in all, the German economy will shrink by 6% in 2020,” Altmaier told Bild newspaper. “For 2021, I expect growth of over 5%.”

The business climate in the manufacturing sector has improved significantly this month, according to the IFO. The service sector also showed a strong surge in optimism looking ahead at the coming months, as did retail. Companies in the construction sector were also happier with their current situation in July, and less pessimistic about the future.

READ MORE: Germany considers compulsory coronavirus tests for returning holidaymakers

This economic optimism depends on Germany avoiding a second wave of coronavirus infections. The country recorded its highest daily new-case tallies since mid-May on Friday and Saturday of last week, which has prompted the government to looking into compulsory testing for all travellers arriving back in Germany.