German business sentiment tumbles in March

German business sentiment nosedived in March as the conflict in Ukraine weighed, according to a survey released on Friday by the Ifo Institute.

The business climate index fell to 90.8 from 98.5 in February, missing expectations of 94.2.

Meanwhile, the expectations index slumped to 85.1 in March from 98.4 the month before, suffering a bigger drop than it did at the outbreak of the Covid pandemic in March 2020. The current situation index fell to 97.0 from 98.6.

The manufacturing gauge slid to -3.3 from 23.1, while the service sector index printed at 0.7 versus 13.6 in February. The index for trade declined to -12.0 from 6.6 and the construction gauge was -12.2 compared to 8.0.

Andrew Kenningham, chief Europe economist at Capital Economics, said: "March’s Ifo business survey provides further evidence that Germany is heading for a sharp slowdown as the war in Ukraine and sky-high energy prices cause manufacturing output to contract.

"However, we still think a recession will probably be avoided because of the post-Covid recovery in the service sector."