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Germany on cusp of recession as business sentiment drops: IFO

Sentiment in German business has cooled significantly and companies, which assessed their current situation as worse, are expecting business to become much more difficult in the coming months, according to the Leibniz Institute for Economic Research at the University of Munich (ifo), which recently said Germany is on the cusp of a recession.
The ifo business climate index fell to 88.6 points in July, down from 92.2 points (seasonally adjusted) in June to reach its lowest value since June 2020.

Higher energy prices and the threat of a gas shortage are weighing on the economy, ifo said.

The manufacturing index plummeted as well. Pessimism regarding the coming months reached its highest level since April 2020 and encompassed almost all industries. For the first time in two years, new orders fell slightly, ifo said in a press release.

In the service sector, the business climate worsened substantially. The collapse was particularly pronounced in companies’ expectations. Service providers assessed their current business as worse.

In trade, the indicator once again took a nosedive. Businesses were less satisfied with their current situation. They are also increasingly concerned about the coming months. At the present time, not a single retail segment is optimistic about the future.