German Businesses Grow More Optimistic Despite Resurgent Virus

(Bloomberg) -- German businesses turned much more optimistic about the economic outlook even as the country struggles to find a response to rising coronavirus cases and slow vaccinations.

The Ifo institute’s gauge of expectations for the next six months climbed to 100.4 in March from a revised 95.0, the highest in almost three years and above all estimates in a Bloomberg survey. Current conditions and the overall business climate index also improved.

“Despite the rising rate of infections, the German economy is entering the spring with confidence,” said Ifo President Clemens Fuest.

Europe’s largest economy probably shrank in the first quarter after non-essential shops, restaurants and other businesses remain largely shut to limit the spread of the coronavirus. Cases are on the rise again, and Chancellor Angela Merkel’s government has struggled to agree on further containment measures.

German manufacturing still increased at a record pace this month, underscoring how much better the sector is faring compared to the first lockdowns a year ago. Services are much more directly affected by the current curbs, which are set to run until April 18.

The government this week approved an extra 60 billion euros ($71 billion) in borrowing to help companies during the pandemic. Constitutional borrowing limits will remain suspended for a third straight year in 2022.

The European Union has fallen far behind countries including the U.S. and the U.K. with its immunization efforts. Hopes now rest on a boost to vaccine supplies in the second quarter, and most economists still expect a strong recovery once restrictions are lifted.

©2021 Bloomberg L.P.