"In view of the rising infection figures, concerns in the German economy are increasing," said Ifo President Clemens Fuest on Monday. "Companies are much more skeptical about developments in the coming months."

According to the Bundesbank, the German economy will continue its recovery in the current quarter, "but at a considerably slower pace". In its monthly report for October, also published on Monday, the central bank writes: "The pre-crisis level is still likely to be significantly undercut by the end of the year."

The recent rapid rise in the number of new coronavirus infections is depressing sentiment in German companies. In October, the Ifo business climate fell by 0.5 points compared to the previous month to 92.7 points, which was more than expected. Analysts had expected a decline to 93.0 points.

Previously, the Ifo index, for which around 9,000 companies are surveyed each month about their economic assessment, had risen for five months in a row. This seemed to mark a turnaround after a drastic slump in March and April, when the measures to combat the pandemic paralyzed large parts of the economy and society.

In the second quarter of 2020, the gross domestic product (GDP) of Europe's largest economy fell by 9.7% compared to the previous quarter. According to calculations by the Federal Statistical Office, this was the sharpest decline since quarterly GDP calculations began in Germany in 1970.

Following the easing of coronavirus-related restrictions, business had picked up again in many sectors. According to the Bundesbank, economic output is likely to have "risen sharply" in the period from July to September inclusive: "Measured by quarterly GDP, the German economy could already have made up for a little more than half of the drastic slump in the first half of the year."

Economists were skeptical about the further course of the year in view of the renewed escalation of the coronavirus crisis. "Today's publication underlines that the time of positive economic news is probably over for the time being," commented Uwe Burkert, Chief Economist at Landesbank Baden-Württemberg, on the Ifo data. However, Commerzbank Chief Economist Jörg Krämer does not expect a second recession in the final quarter of 2020, as "another indiscriminate lockdown is unlikely": "Unlike during the first wave of coronavirus, the government will probably want to avoid shutting down businesses."

German mechanical engineering companies are also alarmed. "The second wave of the coronavirus pandemic is jeopardizing the positive development that is emerging in companies," said Thilo Brodtmann, Managing Director of the VDMA industry association. "We therefore expect the Chancellor to clearly rule out a lockdown. It would have a devastating effect on the economy."

The same applies to cross-border traffic. The VDMA believes that the border closures in the spring were a mistake and must not be repeated in Europe. "Without the free movement of people and goods, the entire EU internal market will not be able to overcome the coronavirus crisis," warned the association.