German business morale declines
German business sentiment fell for the fourth month in a row in August, a key survey showed Friday, deepening the sense of gloom in Europe's biggest economy.
The Ifo institute's closely watched confidence barometer, based on a survey of 9,000 companies, fell to 85.7 points from 87.4 the previous month. Analysts surveyed by financial data company FactSet had expected a better reading, of 86.8 points.
The poor reading came as final official data confirmed the economy stagnated in the second quarter, as the country battles challenges including still-high inflation.
"Sentiment among German managers has darkened further," said Ifo president Clemens Fuest in a statement. "The German economy is not out of the woods yet."
In the key manufacturing sector, expectations remained "starkly pessimistic", with companies increasingly complaining of a decline in new orders, Ifo said.
The business climate also deteriorated in the service sector, trade and construction, it said.
Elmar Voelker from LBBW bank said the reading highlighted "growing negative sentiment" surrounding the German economy, adding: "The already gloomy expectations have become even gloomier."
The German economy was plunged into crisis last year when Russia invaded Ukraine and slashed key gas exports to Europe, sending food and energy costs soaring.
It fell into recession around the turn of the year after two consecutive quarters of contraction, the technical definition of a downturn.
A series of aggressive eurozone interest rate hikes to tame high inflation are also weighing on the economy, while weakness in key overseas markets has hit exporters and manufacturers hard.
Fritzi Koehler-Geib, chief economist at public lender KfW, said the Ifo survey was "disappointing once again" but added there were glimmers of hope.
"I am counting on a revival of consumption in the second half of the year, which is now benefiting from noticeably rising wages and easing inflationary pressure, after the slump last winter."
The situation for industry remains difficult however, she added.
Germany's leading economic institutes expect the economy to shrink by 0.2 to 0.4 percent over the whole of 2023.
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