German business sentiment deteriorates again - Ifo

The business climate index fell to 99.4 from 100.7 in July, missing expectations for a reading of 100.4.

The current situation index came in at 101.4 in August compared to 100.4 the month before, while the expectations gauge declined to 97.5 from 101.0.

Ifo President Clemens Fuest said the drop in the business climate index was due mainly to significantly less optimism in companies’ expectations.

"Concerns are growing in the hospitality and tourism sectors in particular. By contrast, companies assessed their current situation as somewhat better than in the previous month. Supply bottlenecks for intermediate products in manufacturing and worries about rising infection numbers are putting a strain on the economy," he said.

The manufacturing index fell to 24.1 in August from 27.4 the month before, while the service sector index printed at 17.7 versus 19.8. The index for trade was down to 9.0 from 15.8 and the gauge for construction rose to 7.8 from 6.0.

Andrew Kenningham, chief Europe economist at Capital Economics, said: "The second successive decline in the Ifo business climate index in August provides further evidence that Germany’s recovery is losing some momentum.

"Supply chain difficulties will continue to hamper the manufacturing sector and the Delta variant will dampen prospects for the hospitality sector. That said, we still expect very strong GDP growth in Q3."