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Germany’s Ifo Index Slumps Even More Than Initially Estimated in March

German business sentiment plunged even further than initially estimated in March driven by coronavirus fears, darkening the already pessimistic message of last week’s preliminary release by the Ifo Institute.

The Ifo business-climate index came in at 86.1 points in March, below the 87.7 points of the preliminary estimate, the institute said on Tuesday.

“The German economy is in shock,” Ifo Institute’s President Clemens Fuest said.

For the first time since being founded 70 years ago, the Ifo institute published preliminary business-sentiment data for March last week. The preliminary estimate was based on 90% of the usual number of respondents and conducted between March 2 and March 18.

Since its preliminary publication on March 19, the business climate index has fallen by a further 1.6 points, the assessment of the current situation by 0.8 points and expectations by 2.3 points, Ifo said.

In the final release, the overall index of confidence dropped to 86.1 in March from a downwardly revised 96.0 in February, the institute said. Economists surveyed by The Wall Street Journal had forecast it at 87.4 points.

“This is the strongest decline since the German reunification and the lowest level since July 2009,” Ifo said.

The assessment of the current situation fell to 93.0 points in March from 99.0 points in February, below the 93.8 of the preliminary estimate.

“Companies’ expectations in particular have darkened as never before,” Fuest said.

Expectations fell to 79.7 points from 93.1 points in February, below the 82.0 of the preliminary results, the institute said.

Economists polled by The Wall Street Journal forecast figures of 93.6 for the current situation and 81.7 points for expectations.

In the closely watched manufacturing sector, the index fell to its lowest level since August 2009, falling across all branches of industry.

“The drop in manufacturing expectations is the single most precipitous in 70 years of industry surveys,” Mr. Fuest said.

In the service sector, the most affected by the lockdowns, the business climate indicator saw the greatest fall since this data was first recorded in 2005, Ifo said.

In trade, the business climate indicator collapsed, with the exception of food retailers and drugstores, among the few beneficiaries of the coronavirus crisis.

The Ifo index is based on a poll of about 9,000 companies in manufacturing, services, trade and construction.
Source: Dow Jones

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