German economy rebounding, faces risk from virus resurgence

FRANKFURT, Germany — A widely watched indicator of German business confidence has risen for a fifth month in a row as Europe’s largest economy rebounds from the coronavirus shutdowns – but the index remains below its long term average and uncertainty is high with virus cases rising.

The Ifo institute’s index released today rose to 93.4 points in September from 92.5 points in August. The index is based on a survey of thousands of businesses about their view of current conditions and expectations for the future.

In this case the current assessment rose while the expectations part levelled off.

After shrinking 9.7% in the second quarter, the worst quarterly figure on record, the economy is rebounding from the severe shutdowns and restrictions on activity and movement of March, April and May.

Carsten Brzeski, chief eurozone economist at ING bank, said growth could rebound sharply with growth between 5% and 10% in the third quarter. But the recovery faces hurdles and has a long way to go to regain its pre-pandemic footing.

“Given the recent softening of leading indicators, however, there is a risk of a double-dip in the fourth quarter,” Brzeski wrote in a research note, “unless social distancing rules are eased further; a very unlikely scenario given the latest increase in new COVID-19 cases.”