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German business confidence falls again as Covid wave drags on economy

dpa
Munich
German business confidence fell further in November, as supply chain problems and a renewed surge in coronavirus transmission took its toll on Europe’s biggest economy.
The ifo’s closely watched business climate index dropped by 1.2 points on the previous month to 96.5, the Munich-based research institute said on Wednesday.
This was the fifth monthly decline in a row.
Analysts had expected a more moderate fall to 96.7.
“Supply bottlenecks and the fourth coronavirus wave are causing problems for companies,” ifo President Clemens Fuest said.
The companies surveyed assessed both the current situation and future prospects as worse than in October. The business climate index worsened across all economic sectors.
Economists said the results were indicative of economic stagnation or even contraction.
“Highs on the stock markets should not obscure the fact that large parts of the German economy are already in a pretty bad way again,” said Peter Adrian, president of the Association of German Chambers of Industry and Commerce (DIHK).
Compared to Germany’s export-focused economy, the situation in neighbouring France, where the services sector plays a big role, was much better.
The business climate there rose in November to levels exceeding those seen before the pandemic and well above the long-term average, according to figures released on Wednesday.
Supply problems and high purchasing prices apparently weighed more heavily on the German economy than on the French, economist Ralf Umlauf of the Landesbank Hessen-Thueringen said.
The signs now point to a contraction of the German economy, warned Thomas Gitzel, chief economist at VP Bank, looking towards the final quarter of the year.
Joerg Kraemer, chief economist at Commerzbank, was also pessimistic.
“The German economy is likely to stagnate at best in the winter half of the year,” he said.
The DIHK’s Adrian pointed out the poor timing of Germany’s fourth coronavirus wave.
“With the cancellation of Christmas markets, the cancellation of Christmas parties and overnight stays, entire industries are experiencing a similar scenario to last year.” He said this was particularly affecting businesses that would normally generate 30-40 per cent of their sales or more during the festive period.
He welcomed plans by the government to extend financial aid to businesses struggling due to the pandemic until late March. The so-called “bridging assistance” scheme had previously been set to run until the end of this year.
“But everyone in business knows that this is not a sustainable economic model in the long run,” he added.
The federal government on Wednesday announced that it wanted to provide more support for Christmas market stallholders, many of whom have lost business for a second year running.
One way to do this would be to make access to equity grants easier, acting Economy Minister Peter Altmaier said following a cabinet meeting and negotations with the Finance Ministry.
Following recent talks between federal and state governments, political leaders agreed that businesses affected by the Christmas market closures should be able to include seasonal goods that can no longer be sold as a result of the measures in their claims for financial support.
The multibillion bridging assistance programme is a pillar of the German government’s plan to cushion the pandemic’s impact on businesses and jobs.
Currently, companies with a drop in sales of at least 30 per cent compared to pre-pandemic levels are eligible to receive support.
Fixed costs such as rent and utility bills are reimbursed and lost sales revenue covered.

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