The Ifo Business Prosperity Index increased by 1.1 percentage points month on month. The director of the Ifo Institute stated that this is a "glimmer of hope" for Germany's bleak economy. Most experts do not expect significant growth until next year.
A glimmer of light in the bleak economy
In October, the mood of German business executives unexpectedly improved significantly. The Ifo Research Institute in Munich announced on Wednesday that the business climate index of the Ifo survey of approximately 9000 managers increased by 1.1 points from the previous month, reaching 86.9 points.
Reuters reported that the previous expert survey expected only 85.9 points. The German company was more satisfied with the business at that time, and at the same time, had less confidence in the evaluation of the prospects than before. Clemens Fuel, director of Ifo, said, "The German economy has seen a glimmer of light
The German economy shrank for two consecutive quarters at the end of 2022 and the beginning of 2023, and stagnated in the spring of 2023. The Bundesbank and many economists believe that the recent summer quarter saw a decline in gross domestic product. This means that Germany is once again in danger of a technological decline. Most experts predict that the German economy will not experience significant growth until next year.
Good news from the construction industry
There is also good news: the order growth of the German construction industry in August exceeded the growth rate in a year and a half. The Federal Bureau of Statistics announced on Wednesday that after adjusting for inflation, the actual value of new business in the construction industry has increased by 10.8% compared to the previous month. This is the largest increase since the end of 2021. July has seen a strong growth of 9.6%. However, sales in the first eight months of this year decreased year-on-year: orders actually decreased by 7.6%.
The growth of underground construction business, including road construction, is particularly strong: new orders received in August increased by 18.6% compared to the previous month. Statisticians explain that this is mainly the result of large project orders. The growth rate of high-rise buildings, mainly residential construction, was only 1.8%.
Sales in the construction industry also increased in August. Due to the significant increase in construction prices, it increased by 3.8% compared to the same month last year, reaching 9.9 billion euros. After adjusting for inflation, the actual increase was only a small 0.1%. From January to August, actual sales decreased by 4.0% year-on-year. Nevertheless, the number of construction industry employees in August still increased by 1.2% compared to the same period last year.
The European Central Bank (ECB) hopes to address high inflation by significantly raising interest rates, but this clearly poses serious problems for the construction industry. High interest rates make many projects unprofitable for builders, especially when construction prices rise significantly. The mood of many companies has correspondingly deteriorated: for example, the commercial atmosphere in the Ifo residential construction industry has recently been at its lowest level since the survey began in 1991. The sluggish atmosphere in the construction industry has also brought pressure to the overall economy.