German business confidence bucks shutdown impact

BERLIN — German business confidence improved in February, a key survey showed on Monday, as the robust industrial sector of Europe's top economy bears up despite the impact of coronavirus restrictions.

The Ifo institute's monthly confidence barometer, based on a survey of 9,000 companies, climbed to 92.4 points from 90.3 points in January, when the index slipped as tougher measures to fight the pandemic were introduced. 

Analysts surveyed by Factset had expected a smaller increase of 0.4 points.

"The German economy is showing its resilience despite the lockdown thanks to the strong industrial economy," Ifo president Clemens Fuest said in a statement.

The manufacturing sector recorded its highest score since November 2018, surging to 16.1 points from 9.1 points last month.

The mood in the services and retail sectors also brightened, inching up to readings of minus 2.2 points and minus 14.6 points respectively.

Ifo said managers were upbeat about their current situation, rising to 90.6 from 89.2 points last month, while the expectations sub-index jumped to 94.2 from 91.5.

Germany this month extended orders for bars, restaurants, leisure facilities and non-essential shops to stay closed until at least March 7 while allowing schools to partially reopen.

Crucially for production, factories have kept up output during the second wave of the pandemic and are seeing strong demand from China in particular.

But it remains unclear when other businesses will be able to resume operations.

"It's a nice surprise," said LBBW analyst Jens-Oliver Niklash of the closely watched indicator. "But there won't be a quick and full economic recovery without the prospect of a reopening." 

After dropping sharply in January, the number of new infections has plateaued in February in Germany amid serious concerns about highly contagious virus variants.

Germany has recorded nearly 2.4 million COVID-19 cases since the start of the pandemic, and almost 68,000 deaths.

Gross domestic product shrank by five per cent in 2020, its worst contraction since the financial crisis of 2009, due to the impact of the pandemic. 

The government has forecast a 4.4-per cent rebound this year but the uncertain future of the outbreak could force Berlin to revise the estimate downward.