German business sentiment falls further on tight supply

Germany’s business climate worsened in October for the fourth month in a row as supply chain woes weighed on the country’s export-driven economy, according to survey data published Monday.

The Ifo institute’s closely watched indicator fell to 97.7 points in October from 98.9 points in September, its lowest standing since April.

“Supply problems are giving businesses headaches,” Ifo president Clemens Fuest said in a statement, describing the bottlenecks as “sand in the wheels of the German economy”.

The upheaval caused by the pandemic has given rise to global shortages in everything from timber to semiconductors and plastics.

Germany’s key automotive sector has been particularly hard hit by a lack of computer chips, a key component in conventional and electric vehicles, forcing several German carmakers to pause production.

Only in construction did the business climate improve, according to the Ifo survey, while sentiment in manufacturing, services and trade deteriorated.

Growth could be “much weaker” in the coming months, according to Fritzi Koehler-Geib, chief economist at German public lender KfW.

“Material bottlenecks and disruptions in the global transport system have been a burden for longer than originally expected and will probably only ease in the coming year,” Koehler-Geib said.

Earlier this month, German economic institutes, including Ifo, revised down their forecast for growth in 2021 due to global supply chain disruptions to 2.4 percent from their earlier prediction of 3.7 percent made in April.