German enterprise morale improves lower than anticipated in April

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German business morale improved less than expected in April as a third wave of COVID-19 infections and supply problems with components of the industrial sector slowed the recovery in Europe’s largest economy, a poll on Monday found.

The Ifo Institute announced that its business climate index rose to 96.8 from 96.6 in March. A Reuters poll of analysts had indicated a larger increase to 97.8.

“Both the third wave of infections and bottlenecks in intermediate products are hindering Germany’s economic recovery,” said Ifo President Clemens Fuest in a statement.

The companies have again raised their assessments of the current business situation, but were less optimistic for the next six months, according to the survey.

The business climate in manufacturing continued to improve and reached its highest level in almost three years. Industrial companies reported full order books and factories humming.

“The demand situation is still very good,” said Fuest.

Their business outlook was less optimistic, however, with 45 percent of companies reporting intermediate product bottlenecks, the highest since 1991, the institute said.

The Ifo numbers were largely in line with last week’s PMI poll, which found that factories continued to produce goods at near record speeds in April, while activity in the service sector remained sluggish.

The government is expected to raise its GDP growth forecast for 2021 on Tuesday after Economics Minister Peter Altmaier indicated earlier this month that Berlin is considering an upward revision of the 3% estimate presented in January.

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