No Abrupt End to the Corona Shock: How German Companies Assess the Future of the Economy

The present study exploits the regular business survey conducted by the German Economic Institute (IW) to provide guidance on the extent of the operational difficulties companies are currently experiencing and how these impediments are changing. Every week since the beginning of March 2020, companies in all major industries have been asked for an assessment of their situation with a view to identifying any sectoral variation in where the burden falls. Information is also collected on the causes of disruption, i.e. the multiple supply and demand shocks affecting production. According to the ‘corona fever curve’ issued weekly on the basis of the IW survey, two thirds of the responding companies in Germany are currently experiencing severe difficulties as a result of the pandemic. This burden has decreased somewhat, especially in the service sector, perhaps as a result of the concurrent relaxation of restrictions. In contrast to the 2009 financial crisis, the pandemic has affected manufacturing and service industries equally from the beginning. The fact that there is as yet little difference between companies’ short and medium-term expectations suggests that the corona crisis is casting a long shadow over the German economy. While the decline in domestic demand has now assumed considerable significance, a lack of inputs from abroad has become a pressing problem on the supply side.