German business sentiment deteriorated for the fourth month in a row in August to the lowest since late 2022 as companies’ assessment of the current situation weakened sharply and they turned more pessimistic regarding the outlook, survey data from the ifo institute showed Friday.
The ifo business climate index dropped more-than-expected to 85.7 points from 87.4 in July. Economists had forecast a reading of 86.7. This was the lowest reading since October 2022.
The current situation index fell to 89.0 from 91.4 in the previous month. Economists were looking for a score of 90. The latest reading was the lowest since August 2020.
The expectations measure of the survey sunk to 82.6 from 83.6 in July. That was also below the economists’ forecast for a score of 83.8.
“The German economy is not out of the woods yet,” ifo President Clemens Fuest said.
Confidence weakened in all sectors, significantly in the services industry and construction.
In manufacturing, the business sentiment deteriorated in August as companies assessment of their current situation dipped into negative territory for the first time since October 2020. Expectations remained starkly pessimistic.
In the service sector, the business climate cooled notably as service providers were clearly less satisfied with their current situation. They also expect further deterioration.
Business sentiment in trade also declined in August. Firms assessed their current situation as considerably more negative. The outlook also turned even gloomier.
In construction, business confidence continued its nosedive.
Companies were noticeably less satisfied with their current business situation. Pessimism concerning the coming months deepened further.
Data released earlier in the day showed that the largest euro area economy posted nil growth in the second quarter after a 0.1 percent fall in the first quarter and a 0.4 percent decline in the fourth quarter of 2022.
With the latest flat growth, the German economy ended a short period of recession.
ING economist Carsten Brzeski said today’s data pours more cold water on those hoping that the country’s economic weakness will be short-lived.
The latest round of sentiment indicators suggests that the stagnation in the second quarter was not the end of contraction but rather a temporary respite, the economist added.
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