German business sentiment falls again delaying recovery hopes
Situation Were To Current July Worse And Their Panies Both Pared Pessimistic As More Assessed
German business morale fell for a third consecutive month in August, a new survey has shown, pushing back recovery hopes for Europe's largest economy.
The Ifo Institute, an economic research institution based in Munich, said its business climate index fell to 86.6 in August from 87.0 in July, though it came in above a forecast by analysts polled by Reuters for a reading of 86.0.
Ifo president Clemens Fuest said the German economy, the largest in the EU, is “increasingly falling into crisis”.
Companies were both more pessimistic and assessed their current situation as worse, Ifo found in its survey of around 9,000 managers.
The mood in industry, in particular, has noticeably deteriorated, while service providers also saw a dip, Ifo found.
Ifo economist Klaus Wohlrabe said the German economy has “settled into stagnation” citing a lack of orders across all sectors and weak investment and adding that consumers were reluctant to spend due to uncertainty over inflation.
Mr Wohlrabe predicted that the third quarter could bring a further decline in German gross domestic product (GDP), which unexpectedly contracted by 0.1% in the second quarter.
The index measuring current conditions fell to 86.5 from 87.1 the month before, while expectations were down only slightly, at 86.8 from a slightly upwardly adjusted 87.0.
"There are not too many reasons for optimism at the moment," said Landesbank Baden-Württemberg bank's Elmar Voelker.
He listed a bumpy global economy, geopolitical risks and the looming US presidential election in November as factors likely to dampen hopes of any improvement before the end of the year at the earliest.
VP Bank chief economist Thomas Gitzel also saw no economic recovery happening "for the time being".
"The German economy continues to ride on a razor edge between recession and minimal growth," Mr Gitzelsaid.
The Ifo survey is in line with the latest purchasing managers index (PMI) which saw business activity contract in August for a second month in a row and by more than expected.
Together they are part of a raft of indicators that so far this quarter point to anaemic expansion for the economy.
Germany's Bundesbank said last week that a recession was unlikely, though the overall outlook remained muted.