German Businesses Are Optimistic About Recovery in 2021

German businesses are hopeful that Europe’s largest economy will pick up in the first half of next year.

A gauge measuring expectations for the next six months rose to 92.8 in December from 91.8 the previous month, according to the Ifo institute. Companies were also more optimistic about the current situation, a sign that tough new coronavirus restrictions only affect certain sectors.

German Businesses Are Optimistic About Recovery in 2021

“Overall the German economy is showing resilience,” Ifo President Clemens Fuest said. Sentiment in manufacturing rose markedly, and confidence in the services sector recovered “somewhat.”

The survey was conducted Dec. 1-17, with a majority of responses received in the first two weeks of the month -- before the country’s hard lockdown was officially announced.

Germany’s non-essential shops have been shut since Dec. 16 in an attempt to regain control over spiraling infections, adding to restrictions already in place for restaurants, bars and most recreational institutions. The curbs are in place until Jan. 10, though Chancellor Angela Merkel has already hinted they’re likely to be extended.

“The affected companies and people in the affected sectors have very big problems, and certainly some of them will have to give up,” Fuest said in a Bloomberg Radio interview. Yet the fallout will be limited and “will not completely drag down the economy.”

The nation had fared better than many of its neighbors so far, due to its relatively larger reliance on industry, which has been able to adjust to the pandemic. Economists have recently slashed forecasts for the fourth quarter though, predicting another slump.

Bundesbank President Jens Weidmann warned on Wednesday that the German economy may experience greater strains in the short term than his institution had anticipated in its latest projections. However, he said it’s plausible to assume that medical advancements will allow for a phasing out of restrictions from spring 2021 so a recovery can take hold.

Fuest said German companies indicated they expect the curbs to be lifted by July.

©2020 Bloomberg L.P.

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