Ifo: Sentiment in eastern German companies on the rise again

The mood in the East German economy improved significantly in May. The Ifo Institute's business climate index for the East rose by 2.6 points to 89.2 points, according to the Institute's Dresden branch. "The significant increase in the business expectations of eastern German companies is surprising in its extent," said Joachim Ragnitz, deputy head of the Ifo branch in Dresden. Although expectations had also improved throughout Germany, "they were nowhere near as strong as in the eastern German states".

The companies surveyed in the east assessed both their current situation and their expectations for the coming months more positively than in April. This applies above all to the manufacturing industry. The climate also brightened noticeably in the service sector - companies are considerably more optimistic about the coming months than recently, while the current business situation improved slightly.

Retail optimistic, wholesale cautious

The picture in eastern German retail was mixed: While retailers rated current business significantly better, the assessment of the situation in wholesale was noticeably worse. Nevertheless, the retail sector as a whole was much more optimistic about the future than recently.

The business climate also improved in the construction industry. Although the current situation was assessed as slightly worse, expectations for the coming months rose sharply.

Customs conflict less of a burden on sentiment

One reason for this is a correction of the strongly negative assessments in April: "In the previous month, companies in eastern Germany were still significantly more pessimistic than those in Germany as a whole, probably against the backdrop of the tariff increases announced by the US government at the time." According to Ragnitz, companies see significantly better business prospects because the situation has now eased somewhat and the new German government has also promised noticeable growth impetus.

Hope for sustainable recovery grows

"In this respect, there is hope that the low point in economic development has been passed, at least in eastern Germany," emphasized Ragnitz.

The Ifo Business Climate East Germany is based on around 1,700 monthly reports from companies in industry, services, trade and construction. Companies are asked about both their current situation and their expectations for the next six months.