Germany's business climate beats forecasts, still at 2-year low
An indicator of Germany’s business climate came in better than expected for August on Thursday, but was still down month-on-month.
The headline Ifo business climate index fell to 88.5, from July’s reading of 88.7 - well above consensus expectations for 86.8, but still reaching its lowest level since June 2020.
That was driven by a decline in both the expectations gauge, to 80.3 from 80.4, and the current conditions index, to 97.5 from 97.7.
Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said the data confirmed their view that a rebound in the expectations index, at its lowest since at the height of the pandemic, was a long way off.
“Even though the pace of the decline has slowed, we think it will remain consistent with a recession for a while yet,” Debono said.
“By sector the survey was a mixed bag - the retail index fell again, and hit a 27-month low of -25.8 after -21.6 in July, but the manufacturing index held steady, at -6.9, while the services index rose, by 0.3 points to 1.3, as did the construction index to -14.5 from -16.2 in July.”
Meanwhile, Ifo reported that almost half of the companies that responded to the survey expected to raise prices over the coming three months, in line with Pantheon’s call that inflation would remain high in the near term.
“All told, today’s release, while better than expected, leaves us confident in our view that Germany’s GDP is now falling and if, as we expect, further disruption to gas flows leads to energy rationing, the economy will be in technical recession by the end of the year,” Debono added.
Reporting by Josh White at Sharecast.com.