Ifo business climate index falls to record low

Berlin The mood in Germany’s economy is catastrophic. The most important leading indicator, the Ifo business climate index, fell from 85.9 to 74.3 points in April. This is the lowest value ever measured. There has never been a stronger decline. “This is mainly due to the massive deterioration of the current situation,” said Ifo President Clemens Fuest on Friday.

In addition, companies have never been so pessimistic about the coming months. “The corona crisis hits the German economy with full force,” said Fuest. The crisis is now affecting all industries. Even the main construction industry is now worried about the future. So far, together with consumption, it has been the pillar of the economy.

The fact that the effects of the corona-related standstill would hit companies hard in April had become clearer every day since Easter. On Thursday, the Ifo reported that the crisis had hit the labor market: in industry and service providers, one in five companies surveyed by the Ifo want to lay off employees or not to extend temporary jobs.

It is 15 percent in retail, and two percent on construction that has so far been little affected by downtime. In almost all industries, more than 40 percent of companies want to postpone investments – even 31 percent of them are in construction.

How deep the recession will become in 2020 is currently difficult to estimate. “We do not know how much we can start the economy up again without increasing the risk of infection,” Monika Schnitzer told the Handelsblatt. The situation is not comparable to any post-war recession. However, she is confident that Germany will get there in the next few weeks if protective measures are increased and tracing apps are increased.

The purchasing manager index of the IHS Markit institute also fell to a record low on Thursday. In this manager survey, 75 percent of service providers and almost as many industrial managers said that their sales had shrunk significantly. Service providers’ sales fell more than ever in the 20-year history of this survey.

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“Both domestic and export demand has collapsed,” writes IHS Markit economist Phil Smith. In the service sector, more jobs were cut than at the height of the financial crisis recession in April 2009, and in industry, too, the reduction in personnel accelerated – despite short-time work.

In any case, leading economists are starting to further lower their forecasts for 2020. The head of economic operations, Lars Feld, now expects that gross domestic product (GDP) will shrink by at least five and a half percentage points in 2020. It could shrink more than in the 2009 financial crisis recession.

Three and a half weeks ago, when the Economic Advisory Council for Economic Affairs Peter Altmaier (CDU) presented a special report on the corona pandemic, a minus of five and a half percent was still the worst-case scenario. However, the IMF expects German GDP to collapse by seven percent in 2020.

Even in the large economic research institutes, which predicted a minus of 4.2 percent for 2020 in their joint diagnosis two weeks ago, many expect that a five will be before the decimal point. The markets are therefore eagerly awaiting which recession forecast the Federal Government will commit to in the coming week.

However, Stefan Kooths, economic expert at the Kiel IfW, also warned that he would now outdo himself in horror scenarios: that April would be the low point of the year and that GDP would decline by ten percent in the second quarter, he said in early March already expected. The question now is how quickly a recovery can begin.

France: lowest since 1980

However, this also depends on how quickly the economy in the EU countries most affected by the pandemic can get going again, Italy, Spain and France. “As intertwined as our economy, for example, with that in Italy, we have to be very interested in the EU not breaking apart,” said Schnitzer. “It is not just about solidarity, it is in our interest if we help other EU countries,” she emphasized.

However, the prospects for the economy are currently catastrophic in all large EU countries. For example, the IHS Markit Purchasing Managers’ Index fell to a record low for the euro zone on Thursday. In Italy, the IMF expects GDP to decline 9.1 percent this year.

The mood in France’s economy also deteriorated massively in April due to the corona crisis. The business climate has dropped to the lowest level since the start of the surveys in 1980, according to data from the national statistical office Insee on Thursday. The index fell by 32 points to 62 points. There has never been such a sharp drop.

Economic activity in France was 35 percent lower in April than it was before the economy shutdown in March. Insee also does not expect the business climate to recover anytime soon. In this unprecedented environment, the behavior of companies and consumers can hardly be predicted. The French government expects gross domestic product to decline by eight percent this year.

More: According to the Ifo Institute, a fifth of German companies are planning to cut jobs due to the corona crisis.

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Almost a fifth of the companies want to cut jobs

Berlin Daimler– HR Director Wilfried Porth didn’t gloss over anything: “Obviously something is breaking away at the moment that no one knows if it can be caught up,” the manager said last week. The carmaker had to accept a drop in profits of almost 80 percent in the first quarter, sales of the core brand Mercedes decreased by 15 percent. “The fact that we will need to adjust is obvious,” said Porth. He didn’t say the word job cuts. But even before Corona, Daimler had decided to cut up to 15,000 jobs.

The fear of jobs is back in Germany and the virus pandemic will leave deep marks on the job market. Every second company is already doing short-time work. According to a survey by the Ifo Institute, almost a fifth of the companies want to lay off employees or not to extend temporary jobs.

“The fear of jobs seeps in,” says Ifo economist Klaus Wohlrabe. The job cuts plans are apparently based on the concern of many companies that the restrictions on public life in the corona crisis will not end in May.

On average, the companies surveyed expected four months of partial standstill. 84 percent feel a drop in sales due to the corona crisis, only four percent register a growing business. According to the Federal Employment Agency (BA), almost every third of the 2.2 million companies with at least one employee who is subject to social security contributions have registered short-time work.

Previous employment forecasts are becoming more and more waste every day that the corona crisis continues. “For the labor market, we expect unemployment to rise sharply over the next few months. But many companies keep their people, you can see that from short-time work, ”says Enzo Weber from the Institute for Labor Market and Vocational Research (IAB).

BA boss Detlef Scheele expected a rise in unemployment by 150,000 to 200,000 people in April a month ago. The Nuremberg authorities will present the current data next Thursday.

Domestic demand collapses

There is hardly any improvement in sight if you look at the economic development: the purchasing manager index of IHS Markit has plummeted. In the survey, 75 percent of service providers and almost as many industrial managers said that their sales had shrunk significantly. Service providers’ sales fell more than ever in the 20-year history of this survey. “Both domestic and export demand has collapsed,” writes IHS Markit economist Phil Smith.

“Demand levels will not return to pre-crisis levels anytime soon,” says Sascha Haghani, head of the global restructuring practice at management consultancy Roland Berger. That’s about it GfKConsumer barometer, which measures consumer mood, plummeted to a record low.

“Sooner or later the companies will have to adjust their costs accordingly,” Haghani expects. Probably also through job cuts: According to the IHS, more jobs were cut in the service sector than at the height of the financial crisis recession in April 2009, and the reduction in personnel is also accelerating in industry.

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The Ifo survey also shows how wide the shock waves are spreading in the economy: in industry and service providers, almost every fifth company wants to lay off employees or not to extend temporary jobs. It is 15 percent in retail, and two percent on construction that has so far been little affected by downtime. Leading economists such as the head of business practices, Lars Feld, are starting to adjust their forecasts for 2020 downwards.

After Chancellor Angela Merkel and the Prime Ministers decided a slow restart of the economy last week, he expects gross domestic product (GDP) to shrink by at least 5.5 percentage points in 2020. Even in the economic institutes, which predicted a minus of 4.2 percent for 2020 in their joint forecast two weeks ago, it is now expected that a five will be before the decimal point.

The IAB had anticipated a 4.7 percent decline in GDP in March, when the economy largely stands still for two and a half months and only normalizes by the end of the year. In this case, the number of unemployed could temporarily rise from the current 2.3 million to more than three million, the Nuremberg researchers predicted at the time.

A well-known restructuring expert expects Corona to increase unemployment to as many as four million people. Especially badly hit sectors such as tourism and gastronomy are affected, but also important branches of industry such as the automotive suppliers.

The government is obviously also assuming a long period of weakness on the labor market. For example, for all unemployed people who would slide into Hartz IV between May and December, the duration of the unemployment benefit will be extended by three months. “Those who are just becoming unemployed or who have recently become unemployed currently have little chance of finding a job again,” said Labor Minister Hubertus Heil (SPD).

In order to counter the allegations made by the unions, in particular, that politicians are more concerned with companies than with employees, the coalition committee also decided on Thursday night to increase the short-time work allowance – staggered according to the duration of benefits.

It is currently 60 percent of net income and 67 percent for employees with children. From the fourth month in Corona short-time work, employees whose working hours are reduced by at least half are now to receive 70 or 77 percent. From the seventh month, the rates increase to 80 to 87 percent.

In addition, short-time workers who take up another job can earn up to the amount of their previous monthly income. So far, this was only true for “systemically relevant” activities such as care or agriculture.

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The gradual increase in short-time work benefits has met with criticism: “I would have preferred a faster increase, especially for low-wage earners,” said Sebastian Dullien, head of the Institute for Macroeconomics and Business Cycle Research (IMK). In a survey, 40 percent of employees who were on short-time work said that they would get by with the money for a maximum of three months.

Employers see “contribution club”

The decision met with a mixed response among the unions, which had hoped for a general increase to 80 or 87 percent from the start. “This protects many employees from existential hardships,” praised IG Metall boss Jörg Hofmann. On the other hand, the chairman of the Food, Beverage and Catering trade union (NGG), Guido Zeitler, declared that the increase was correct, but was too small and too late.

In the hospitality industry, employees could probably only expect 80 percent of normal net wages in October 2020. According to the NGG calculations, according to the new plans, a cook in Berlin will have around 1,070 euros instead of around 920 euros and short-time work from around 1,220 euros from the seventh month. “For hundreds of thousands of people with low incomes, the only thing left to do is to apply for Hartz IV,” said Zeitler.

IAB labor market expert Weber also criticizes the fact that the planned changes will not benefit employees in the low-wage industries in a very targeted manner. “In the end, industrial sectors that have long been in recession could benefit in particular.”

For Holger Schäfer from the employers’ institute of the German economy (IW), it is not at all clear which problem the government wants to solve with the compromise: “In the end, a lot of money is spent on a purpose that is not clearly defined.” According to Schäfer’s calculations, the BA would need 24 billion euros to send 4.5 million full-time average earners without children on short-time work for three months. The employment agency’s reserve is just under 26 billion euros.

The criticism from business was correspondingly harsh. Employer President Ingo Kramer praised coalition decisions such as help for restaurants and the easier return of losses for companies. But they would be overlaid by “spending money with a watering can”.

The employers’ association Gesamtmetall criticized that the decisions on short-time work were expensive and caused an enormous additional administrative effort at the BA: “There is great concern that when the economy restarts, the tax and contribution club will fall on the employees and companies,” said CEO Oliver Zander the Handelsblatt. BA boss Scheele said that he would have liked a “simpler regulation”.

Monika Schnitzer, a new member of the Council of Experts, told Handelsblatt that she could understand that the government wanted to expand short-time work benefits. “But I think the chosen way of increasing is problematic.” After all, many employers voluntarily increased to keep their employees. I am afraid that it will have a high share of deadweight effects. ”

Ifo President Clemens Fuest believes the decisions will stabilize consumer demand. They are therefore also “a suitable economic policy measure”. The same applies to the extension of the period of unemployment benefit

More: Tax cuts, premiums, aid: Germany’s economists argue about state aid

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Investors shake off the end of the special routes in Japan and Singapore

Coronavirus – Tokyo Stock Exchange

The investors in Tokyo are infected by the optimism from the USA.


(Photo: dpa)

Tokyo In Asia, even Singapore and Japan’s departure from their special pathways in the coronavirus pandemic cannot frighten investors. After Singapore announced tightening exit restrictions and closings on Friday and Japan announced the emergency for the metropolises of Tokyo and Osaka on Monday, share prices nevertheless rose across the board.

In Japan, the Nikkei 225 index briefly skyrocketed by more than three percent. Because investors had expected last week that Japan’s Prime Minister Shinzo Abe would declare an emergency. The Nikkei then went for lunch with 18,249.57 points, 2.4 percent.

In Singapore, the Straits-Times index rose meanwhile by more than one percent. Korea’s Kospi index even rose by 1.9 percent shortly after eleven o’clock, the Australian All Ordinaries by 2.8 percent. In China, the stock exchanges are closed due to a public holiday.

Hope for change in New York, expected terror in Asia

As a reason for relief, observers cited the news from the United States that deaths in New York had dropped for the first time. And in Asia, government moves in Japan and Singapore seem to have been priced in – at least for this moment.

The Japanese business newspaper Nikkei ruled that investors were still worried about the economic downturn. “But it is unlikely that this will be a reason for a sell-off, since it will not stop the movement of essential facilities such as supermarkets and stock exchanges.” The measures are likely to exacerbate the economic situation in Singapore and Japan for a short time.

State of emergency in Japan

In Japan, the state of emergency with Tokyo and Osaka will hit the two largest metropolises of millions. The government plans to declare a state of emergency to curb the rapid rise in Covid 19 diseases in the two densely populated megacities. There, the local governments have already asked the populations and companies not to leave their homes or close shops without good reason. But as soon as the state of emergency is declared, governments can also demand it (but without being able to punish for violations). Economists therefore expect that even more citizens and companies will respond to the appeals than they do now – with growing negative consequences for the economy.

An evaluation of the “Citymapper Mobility Index” service showed that citizens’ mobility had temporarily dropped between nine percent and 13 percent of normal value in the middle of last week. These are roughly Berlin values. In Madrid, however, it was only two percent.

As a result, Goldman Sachs Japan economists warned that a month-long emergency in the Tokyo metropolitan area could shrink Japan’s economy by a further 0.7 percentage points in the baseline scenario. In this case, gross domestic product in the current quarter could fall by 10.6 percentage points over the year.

The slump in the simulation rises to 20 percentage points if an emergency is declared in the entire greater Tokyo area with the neighboring prefectures Kanagawa, Chiba and Saitama. After all, the government announced on Tuesday that it would adopt an emergency program amounting to around ten percent of its gross domestic product. In addition to direct payments to low-income families, it also includes direct payments and loans to companies and the self-employed.

Singapore is tightening the restrictions

In Singapore, residents were used to greater freedom than Japan. Even the schools were open. But the number of infections, the origin of which the authorities can no longer understand, is also increasing there. As of Tuesday, all companies that are not considered essential must send their employees home. Schools and kindergartens will also be closed from Wednesday. For example, the government wants to stifle an explosion of Covid-19 infections before it really starts.

More: Read all current developments regarding the corona pandemic here.

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HRI consumption barometer: consumer sentiment drops to record low

Dusseldorf In the worst recession in German post-war history in the winter of 2008/09, private consumption still proved to be a stabilizing factor. But what the German economy is experiencing right now is putting everything previously known in the economy in the shade.

Because the massive restrictions in everyday life that the government has put in place to curb the corona pandemic not only put pressure on overall economic production, they obviously also have a massive impact on private consumption.

This is signaled by the HDE consumption barometer for April, which fell 3.25 points compared to the previous month to now 96.66 points. For comparison: The biggest drop in a month so far was not even half as big at 1.45 points in September 2018.

The barometer has been calculated monthly by the Handelsblatt Research Institute for the HDE trade association since the beginning of 2017. It is based on a representative survey of consumers. It shows the current consumer mood, which will be reflected in private consumption over the next three months.

In the past few days, various economic researchers have outbid themselves with pessimistic forecasts. Federal Minister of Economics Peter Altmaier (CDU) admitted on Thursday that the cuts should be “at least as strong as in the financial year as a whole during the financial crisis” – in 2009 the German economy shrank by 5.7 percent. “We assume that in individual months in the first half of the year economic growth can drop by more than eight percent,” said Altmaier. “After ten years of economic growth, we will have a recession again this year. But this recession has to remain temporary. “

Hope to compensate for the loss of income

Conversely, consumers do not see a rapid recovery – on the contrary. Their economic expectations fell by 16 points in April, as a partial evaluation of the HDE barometer shows. The decline in individual income expectations and the propensity to buy was also noticeable, but significantly less. The majority of consumers apparently assume that they themselves will not be affected as much by the overall economic slump.

On the one hand, this could result from the fact that disposable income, for example from civil servants, pensioners and other transfer recipients, will not be affected in the short term by a recession.

In addition, many employees in the private sector can hope that the state will compensate for a large part of their loss of income, for example with short-time work benefits. In addition – as is quite common in crises – consumers’ propensity to save, short-term loss of income, apparently consumers want to compensate by releasing reserves or low savings rates.

Short-term winner of the corona shock is likely to be the food retail trade in addition to the mail order business. According to the latest data available for February, all retail sales were 6.4 percent in real terms than in the same month of the previous year. Sales of food, beverages and tobacco actually rose by 7.8 percent in real terms.
The outlook for the service sector, however, is bleak.

The seasonally adjusted IHS Markit Service Index for service providers’ business, released on Friday, dropped to 31.7 points in March after having reached 52.5 points in February, well above the growth threshold of 50 points.

The situation may worsen

This decline marked the sharpest slump since the survey was launched in June 1997. The previous record low of 41.3 points came from February 2009. Markit expert Phil Smith calls it “unprecedented”.

Nevertheless, the German economy generally appears to be somewhat more resilient than other large countries in the euro zone due to its low dependence on travel and tourism and consumer-related services.

The service index in Italy dropped to 17.4 points. But perhaps this is just a “foretaste of what the other countries will face as a result of increasing business closures and curfews and tighter controls,” warned Markit.

More: This is how the corona crisis affects trade, industry and commerce.

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Dax closes slightly in the red – US labor market data show hardly any effects

Dax curve

View of the Dax curve in the Frankfurt trading hall.


(Photo: dpa)

Dusseldorf The Dax reacted relatively calmly to the job cuts in the USA on Friday. After an initially unsteady ups and downs, the leading German index fell only slightly after the US labor market data was published and closed 0.5 percent lower at 9526 points. in the Course of the week is that Minus at more than one percent.

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