Despite the war, the problem of fresh supplies increased German business confidence

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(Bloomberg) – German business confidence has soared as companies continue to navigate the war in Ukraine and renewed supply-chain disruptions.

A measure of expectations for the Munich-based IFO Institute rose from 86.8 in April to 86.9 in May, although it remained below the long-term average. Economists predicted a slight decline. An indicator of the current situation has also risen.

“The German economy has proved itself resilient in the face of inflationary concerns, material barriers and the war in Ukraine,” IFO President Clemens Fouest said in a statement on Monday. “There are currently no signs of a recession.”

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As the conflict in Ukraine continues, businesses and families are facing increasing energy costs and uncertainty about the future supply of Russian fossil fuels. What’s more, there are new logistical strains – both fighting and sanctions response, as well as new epidemic restrictions in China.

Policymakers have expressed concern that the economy is facing stagnation, with modest growth and sharp rise in prices. German Finance Minister Christian Lindner said the threat should not be underestimated and that the stock market has fallen as investors have digested the growing headwinds.

A growing number of European Central Bank officials are still in favor of raising interest rates in July to ensure that the current record inflation rate does not shrink. German prices jumped 7.8% last month – almost four times the ECB’s target.

The European Commission last week lowered its 2022 growth forecast for the euro area by 2.7%, while warning that disruption of Russian natural-gas flows would almost halt epidemic recovery. Other studies suggest that the situation could start a recession in Germany, where there is a high reliance on imported gas.

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