German business morale improves less than expected in April

German business morale improved less than expected in April as a third wave of COVID-19 infections and component supply issues to the industrial sector slowed the recovery in Europe’s largest economy, showed a survey on Monday.

The Ifo Institute said its business climate index edged up to 96.8 from 96.6 in March. A Reuters survey of analysts had shown a larger increase to 97.8.

“The third wave of infections and bottlenecks in intermediates are hampering Germany’s economic recovery,” Ifo chairman Clemens Fuest said in a statement.

Companies once again raised their assessment of the current business situation, but were less optimistic about the next six months, according to the survey.

The business climate in the manufacturing sector has improved further to reach its highest level in nearly three years, with industrial companies reporting full order books and buzzing factories.

“The demand situation is still very good,” Fuest said.

But their business outlook was less optimistic as 45% of companies reported bottlenecks in intermediates, the highest value since 1991, the institute said.

The Ifo figures were broadly in line with last week’s PMI survey which showed factories continued to produce goods at near-record rates in April, while activity in the services sector remained sluggish.

The government is expected to raise its GDP growth forecast for 2021 on Tuesday after Economics Minister Peter Altmaier hinted earlier this month that Berlin was considering a 3% upward revision of the estimate it had presented in January.

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