Germany's Economy Shows Signs of Recovery... Manufacturing and Service Sectors Revive

IFO Economic Research Institute, Business Climate Index 92.6
Improved for 4 Consecutive Months
Germany Expected to Record 7% Growth Rate in Q3 This Year

[Asia Economy Reporter Naju-seok] The German economy is showing a rapid recovery. With growing expectations for economic recovery in both manufacturing and service sectors, the business climate index has improved significantly.

German vehicles waiting for export [Image source=Reuters Yonhap News]

On the 25th, the German IFO Institute for Economic Research announced that the German business climate index, which indicates the confidence of German companies in the economy, recorded 92.6 this month. This surpassed not only last month's business climate index of 90.4 but also the market expectation of 92.2. The German business climate index has shown improvement for four consecutive months.

The IFO Institute stated, "The German economy has entered a recovery phase," adding, "Companies are evaluating that the business environment has improved this month compared to last month."

According to the IFO Institute's survey, business confidence is rapidly recovering not only in manufacturing but also in service and construction sectors.

IFO expects Germany's Gross Domestic Product (GDP) to grow by 7% in the third quarter of this year. The German economy recorded -9.7% in the second quarter, when the COVID-19 pandemic was at its most severe. Looking solely at the growth trend, it forms a V-shaped recovery.

However, an IFO Institute official noted, "The rebound momentum is still fragile," and "It has not yet reached the pre-COVID-19 pandemic state." The IFO Institute analyzed that if a second wave of COVID-19 occurs in Germany, the recovery trend could be disrupted.

Furthermore, although conditions for German companies are improving, the export recovery remains relatively sluggish. This is believed to reflect the slow economic recovery in countries other than Germany.

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