The business environment for German retailers 'brightened noticeably' in March, the latest ifo Business Climate indicator has found, with firms' assessment of the current economic situation rising to -7.3 points, up from -18.1 points in February.
The ifo, which compiles the indicator, also noted a 'clear improvement' in business expectations among German retailers.
Reduced Pessimism
“The pessimism that has been such a feature of recent times is receding," commented ifo spokesperson Patrick Höppner. "Business in the run-up to Easter apparently brought a ray of hope for many retailers."
Among the retail sectors that were most positive about their current business situation, DIY stores, bicycle dealers, and clothing retailers came out on top, although food retailers also experienced an upturn. Computer/software retailers and car dealerships saw a slight deterioration in their business situation, however.
The number of retailers planning price increases in the coming months is lower than at any point in the past three years, the ifo added.
The proportion of retailers affected by supply chain bottlenecks also declined – in March, logistical challenges affected 29.1% of retailers, down from 32.6% in February.
“This means the uncertainties in maritime trade due to the crisis in the Red Sea are still of minor consequence for many retail supply chains,” Höppner added.
Price Expectations
Elsewhere, ifo said that price expectations in Germany fell to 14.3 points in March, down from 15.0 points in February, and are now at their lowest level since March 2021.
Price expectations fell in retail (25.4 points, down from 29.5 points) and in the hospitality industry (29.5 points, down from 54.4 points), while there was a slight increase among hotels (33.4 points, up from 31.7 points) and tour operators (36.9 points, up from 36.6 points).
“Inflation is still on the decline and should fall below 2% this summer," commented Timo Wollmershäuser, head of forecasts at ifo. "From a German perspective, there’s no reason why the ECB shouldn’t cut interest rates soon."
