German Business Confidence Plummets as Lockdowns Persist

(Bloomberg) --

German business confidence extended its slump in April with much of the global economy in lockdown and companies anticipating a prolonged period of subdued demand.

The Ifo Institute’s index dropped to a record-low 74.3, well below economists’ median estimate. Reduced spending power from millions of furloughed workers and the persistence of the coronavirus pandemic in some of Germany’s largest trading destinations are set to weigh on business for some time to come -- with a gauge for expectations down more than 10 points.

“Sentiment at German companies is catastrophic,” said Ifo President Clemens Fuest. “Companies have never been so pessimistic about the coming months. The coronavirus crisis is striking the German economy with full fury.”

Daimler AG abandoned a forecast on Thursday it made just two months ago for significantly higher annual profit. The pandemic is making it difficult to assess just how much earnings will decline this year, the automaker said. German broadcaster ProSiebenSat.1 expects total TV advertising revenue in April to decline by around 40%, with business severely affected by the crisis.

What Bloomberg’s Economists Say...

“Nothing can be done to prevent a deep recession, but providing support to those who need it while containment measures are in place will enable many businesses and households to get back on their feet quickly once the pandemic passes.”

--Jamie Rush, chief European economist. Read the GERMANY INSIGHT

Governments from across Europe are attempting to soften the economic blow from the virus with unprecedented stimulus, and on Thursday signed off on a 540 billion-euro ($580 billion) plan tackling the immediate fallout. Germany itself has promised unlimited guarantees on loans for smaller businesses, as well as about 1 trillion euros in funds to help larger ones.

Still, Friday’s Ifo release is one of several pointing to a sharp recession, with a separate indicator on Thursday showing huge declines in private-sector activity across Germany, France and the 19-nation euro region. German consumer confidence is at a record low.

Ifo’s survey covers 9,000 companies from industries including manufacturing, services and construction.

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