GERMAN companies are turning pessimistic on the recovery, potentially marking the beginning of a major economic setback after half a year of gradual improvements.

The Ifo Institute’s business climate index dropped for the first time in six months, just as coronavirus cases in the country reached new records. The reading of 92.7 in October was lower than the median forecast of economists in a survey, and compares with 93.2 the previous month. A gauge of expectations also deteriorated.

“What’s worrying at the moment is really the rise in infections — it’s unclear what could stop that, and that will have an impact on the recovery,” Ifo president Clemens Fuest said. “For Germany, we don’t see a double dip yet, but the risk is certainly rising.”

Local authorities have introduced a range of new restrictions and curfews after the pandemic made a strong resurgence this month. Chancellor Angela Merkel has promised to do all she can to prevent another lockdown similar to the one that hammered the economy in the second quarter, yet businesses are already feeling the strain.

Germany, which has Europe’s biggest economy, is widely viewed as having handled the first phase of the pandemic well. Its shutdown in the spring was relatively mild and short compared with those in some other European countries.

But Germany hasn’t been spared the sharp rises in new infections seen across Europe in recent weeks.

(SD-Agencies)