German business confidence at lowest level since 2012
Amid growing concerns about a looming recession, confidence among German business leaders fell in August to its lowest level since late 2012, a widely-watched survey showed Monday.
Having already dropped sharply in July, the Munich-based Ifo institute’s monthly barometer declined further to 94.3 points, its lowest level since November 2012, from the revised figure of 95.8 in July.
The latest figures, based on a survey of 9,000 German companies, reflect a bleak outlook among business executives in Europe’s biggest economy, said Ifo president Clemens Fuest.
“The wrinkles of concern among German corporate leaders are getting deeper and deeper -- the signs of a recession in Germany are intensifying,” he added in a statement.
“The companies again assessed their current situation significantly more negatively. Pessimism also increased with a view to the coming months.”
The mood is low in the German business sector due to a slowdown in orders, prompted by the year-long trade war between the USA and China and concerns about what shape Britain’s exit from the European Union will take on October 31.
“Germany is on the threshold of a technical recession,” declared KfW economist Klaus Borger.
“The weak world economy, the threatening chaotic Brexit on Halloween and the escalating trade conflict between the USA and China are a heavy burden in particular for the industrial heart of the German economy.” Last week the German central bank warned that the nation’s economy could enter recession in the third quarter as a result of a “sharp contraction” in industrial production.
“In the manufacturing sector, the decline in the business climate indicator cannot be halted,” Fuest noted.
“A similar pessimism among industrial firms was last seen during the crisis year of 2009.” A year after the Ifo stood at close to its record high of 104.2 points, the index has now dropped for the eleventh time in 12 months.
“In particular, the German manufacturing sector still seems to be in free fall,” said ING analyst Carsten Brzeski.
“At least in the short run, there is very little hope for a rebound.” With no end in sight to the tensions between Washington and Beijing, “it would take some relief from the ongoing trade conflicts and a general sentiment improvement to boost industrial activity” in Germany during the rest of 2019, said Brzeski.