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26 Mar 2021 | 09:33

German business activity beats expectations - Ifo

(Sharecast News) - German business activity beat expectations in March as sentiment jumped to the highest for almost two and a half years, a widely read survey showed. The Ifo business climate index for Europe's biggest economy rose to 96.6 from 92.7 a year earlier - the highest reading since June 2019. Analysts' average forecast was for a figure of 93.2.

The expectations index rose to 100.4 from 95 and the current assessment measure increased fo 93 from 90.6. The survey shows German business leaders getting ready for a full reopening of the economy but an extended lockdown is likely to dampen sentiment and activity with Covid-19 infections rising.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "These are strong numbers, indicating that the German economy was in strong recovery mode at the end of Q1. Unfortunately, we have to assume a setback next month, especially in services, as new virus restrictions bite.

"That said, we are now very interested in seeing whether expectations hold up. The leap in March is punchy, and if vaccination continues to improve, we doubt that the outlook will collapse in April, even if business leaders now have to contend with a new lockdown."

Sentiment in manufacturing rose to 24.1 from 16.4 and the services index snapped back to 6.5 from -2.2 the previous month.

Vistesen said the figures suggested Germany's economy shrank 0.5% in the first quarter after a 0.3% increase in the fourth quarter of 2020.

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