German Ifo Business Confidence At 28-Month Low

German business confidence declined to the lowest level in more than two years in September signaling that the economy is slipping into a recession, survey results from the ifo Institute showed on Monday.

The business confidence index fell sharply to 84.3 in September from 88.6 in August. This was the lowest since May 2020 and also below economists’ forecast of 87.0.

Companies assessed their current business as clearly worse and pessimism regarding the coming months has grown, ifo President Clemens Fuest said.

Business confidence deteriorated across all four sectors of the economy. In manufacturing, the business climate index fell as companies were less satisfied with their current business and their expectations hit the lowest since April 2020.

At the same time, business sentiment took a nosedive in the service sector. Assessments of the current situation were significantly worse. Companies expected a further marked deterioration in the coming months.

The business climate worsened again in trade in September. For the first time since February 2021, the business situation fell again into negative territory. Expectations also darkened further.

In construction, the index weakened noticeably. Businesses were less satisfied with their current situation. Expectations were more pessimistic than in the previous month.

The further big fall in the overall business sentiment in September adds to the gloom surrounding the German economy as worries about energy prices and declining household real incomes dent business confidence, Andrew Kenningham, an economist at Capital Economics, said.

GDP is expected to contract in both the third and fourth quarters of this year, the only question being how deep and prolonged the recession is, the economist added.

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