Ifo Institute and its Business Climate Index

Germany has the largest economy in Europe as well as one of the largest economies in the world. It means that the state of the local economy is important when it comes to determining the state of the global economy. The coronavirus pandemic created a lot of problems for the countries around the globe and Germany is not an exception. Hopefully, German business morale improved more than expected in August according to the survey conducted by the Ifo institute.

According to the Ifo institute, its business climate index rose to 92.6 from a downwardly revised 90.4 in July. People should take into consideration that; business climate index rose for the fourth month in a row. The result for August surpassed expectations.

Based on the information released by Ifo President Clemens Fuest, the firms assessed their current business situation much more optimistically than in July.

Interestingly, the Ifo survey recorded the strongest gains in business morale among manufacturers as well as service providers. Moreover, sentiment among construction firms was also improving.

Ifo Institute and the German economy

As mentioned above, the coronavirus pandemic created serious problems for the local economy. According to the Ifo institute, business morale increased in August. However, the situation is far from being ideal.

Notably, Germany’s parliament suspended its debt brake this year. As a result, the country’s government has the ability to finance its crisis response with a record new debt of 217.8 billion euros ($257 billion).

The German state recorded a budget deficit of 51.6 billion euros from January to June based on the information provided by the statistics office.

Importantly, the government’s stimulus measures include a temporary VAT cut from July to December worth up to 20 billion euros. The measure should boost household spending thanks to additional cash. However, it will take time to analyze all damage caused by the coronavirus pandemic. Nevertheless, Europe’s largest economy has the potential to deal with problems.