German business sentiment strengthens

Business sentiment has strengthened in Germany, a closely-watched survey showed on Tuesday, as the economy emerged from the worst of the Covid-19 pandemic.

The Ifo business climate index rose to a five-month high of 98.9 in February, up on January’s 96.0 and well ahead of expectations.

Companies were more satisfied with their current situation, with that index rising to 98.6 from 96.2, and there was a marked improvement in the expectations index, which jumped from 95.8 to 99.2, the highest reading since July.

Clements Fuest, president of the Ifo Institute, said: "The German economy is betting on an end to the coronavirus crisis.”

However, he also conceded: "The escalation of the crisis engulfing Ukraine remains a risk factor."

The survey, which is based on around 9,000 monthly responses from businesses in the manufacturing, service, trade and construction industries, was published just hours after Russian president Vladimir Putin ordered troops into two rebel-held regions in eastern Ukraine.

Within individual sectors, the manufacturing index rose to 23.5 from 20.0 as order books grew, although raw material shortages remained an issue.

The index for the services sector surged to 13.5 from 7.7, and the gauge for trade returned to positive territory, rising from -1.3 to 6.6. Ifo said year-over-year trade sales grew "sharply", although both wholesalers and retailers continued to report supply bottlenecks.