bvdm economic telegram May 2021: Declining corona infection figures cause business climate index to rise again
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After the business climate in the German print and media industry had clouded over in April, it brightened up again in May. The business climate index calculated by the Bundesverband Druck und Medien (German Printing and Media Industries Federation) rose by a seasonally adjusted 3.6 points compared with the previous month. At 98.8 points, the index is now only around 4 percent below its pre-crisis level. At present, both the hopes associated with the declining corona incidence figures that restrictions will soon be eased and the improvement in the current business situation are contributing to the brightening of sentiment.
In May, the printing and media companies surveyed by the ifo Institute were more confident than in the previous month in assessing both their current business situation and their business situation expected for the next six months. The values of the current and expected business situation determine the development of the business climate, which is a good leading indicator for the production development of the print and media industry.
Whereas the seasonally adjusted business situation index stagnated in April, it rose again in May to 89.7 points, 3.8 percent above the previous month's figure. This increase means that the index is now 18 percent above its prior-year level. However, this enormous year-on-year increase in May must also be seen against the backdrop of the statistical base effect, which had already heavily distorted the year-on-year comparison in April. For example, only around 18 percent of business leaders currently rate their current business situation as positive, while 38 percent rate it as poor. This represents an improvement of around 28 percentage points compared with the previous year. Nevertheless, it is important to bear in mind that around 52 percent of companies still classify their order backlog as "too small" and 40 percent their current earnings situation as weak.
Despite these ongoing difficulties, print and media companies' expectations regarding their future business development were slightly more optimistic than in the previous month. In May, the seasonally adjusted business expectations index rose by 3.7 percent to 108.7 points. The index is thus around 15 percent above its year-ago level. A major reason for this increase is likely to be the decline in infection figures since the end of April and the associated expectations of an easing of restrictions in the near future. Advertising printing, which is so relevant to the print and media industry, is likely to benefit from this in particular. In May, around 23 percent of all respondents stated that they expected a more favorable business situation in the next six months. Only around 15 percent expressed concern. The balance thus improved by around 26 percentage points compared with the previous year.
