BERLIN (Reuters) – German business morale improved in February across all sectors as hopes for an end to the coronavirus crisis more than offset worries about the Ukraine conflict, though a possible escalation remains a major risk, a survey showed on Tuesday.
The Ifo institute said its business climate index rose to 98.9 from an upwardly revised 96.0 in January, the highest level since August last year. A Reuters poll of analysts had pointed to a February reading of 96.5.
“The results of the February Ifo survey are a clear sign that the German economy will benefit massively from the easing of the coronavirus crisis in the coming months,” said Joerg Kraemer, chief economist at Commerzbank.
At the same time, a possible escalation of the situation in Eastern Europe hangs over Europe’s largest economy “like the Sword of Damocles,” experts said.
“While such a strong reading would normally spread optimism, last night’s Russia-Ukraine developments have probably made this prominent leading indicator rather backward-looking,” ING economist Carsten Brzeski said.
“The uncertainty will increase massively,” Ifo expert Klaus Wohlrabe told Reuters, adding the biggest risk for German companies comes from rising energy prices. “That would be poison for the recovery,” Wohlrabe said.
KfW chief economist Fritzi Koehler-Geib also said the results confirm the bank’s expectations for a growth spurt from spring onwards, but that growth can happen only if an armed conflict remains limited to the Donbass region of Ukraine.
(Reporting by Zuzanna Szymanska and Rene Wagner; Editing by Maria Sheahan, Miranda Murray and Paul Carrel)
