German business suffers on supply shortages and virus woes

Photo: EPA Clemens Fuest

The business climate index in Germany posted a surprising fall as the recent surge in Covid-19 infections prompted concerns over possible difficulties linked to glitches in the supply chains of raw materials. Local entrepreneurs share fears that the last economy rebound from the pandemic recession will be short-lived, Reuters reported.

The Ifo institute said its business climate index fell to 100.8 from a revised figure of 101.7 in June. A previous poll of analysts had pointed to a July reading of 102.1. “The mood in the German economy has been dampened," Ifo President Clemens Fuest said in a statement.

Supply problems are weighing down on the manufacturing and the retail sectors, with almost 64% of industrial firms complaining about shortages in materials, according to the institute. Firms gave a slightly better assessment of their current situation, but optimism with regard to the coming months disappeared. The Ifo expectations index fell to 101.2 from 103.7 in June, while the current conditions index rose to 100.4 from 99.7. Events including the Covid-19 pandemic, natural disasters in China and Germany and cyber attacks have conspired to drive global supply chains towards a breaking point, threatening the fragile flow of raw materials, parts and consumer goods, according to companies, economists and shipping specialists. The tourism and consumer sectors were especially worried about a fourth coronavirus wave. After more than two months of steady decline, Covid-19 cases have been rising in Europe's biggest economy since early July, due mainly to the spread of the more infectious Delta variant.

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