Third wave, supply issues slow German recovery

A third wave of infections and a semiconductor shortage in the auto sector is slowing the recovery in Europe's largest economy.

With German business morale improving only slightly in April.

In its survey, the Ifo institute said its business climate index edged up to 96.8 from 96.6 in March - less than analysts had forecast.

Germany is struggling to contain an aggressive third wave of the virus.

And the survey showed businesses were less optimistic about the coming six months.

Ifo President Clemens Fuest:

"The other big issue we have for our economic development in industry is the intermediate products. 45% of the industrial companies report that they have problems with the supply of intermediate products, especially with semiconductors. We haven't had such a figure since German reunification. This also means that the economic recovery in our country will be rather restrained."

Germany's big car makers are struggling to ramp up production due to a global shortage of semiconductors.

The situation has exposed the sector's dependency on a few Asian suppliers.

The Financial Times reported at the weekend that Volkswagen has warned managers to prepare for a bigger production hit in the second quarter due to the chip shortage.

The Ifo data though showed business climate in manufacturing improved further to reach its highest level in nearly three years, with industrial companies reporting full order books and humming factories.