The mood in the German economy clouded over noticeably in June due to concerns about the energy supply. The Ifo business climate fell by 0.7 points to 92.3 points in a monthly comparison, as the Ifo Institute announced on Friday in Munich. Analysts had expected a downturn, but only a slight one to 92.8 points.
“Rising energy prices and the impending gas shortage are causing the German economy great concern,” commented Ifo President Clemens Fuest. On Thursday, the federal government declared the alarm level in the gas emergency plan. The reason is a sharp reduction in gas supplies by Russia. Economists warn of significant consequences for the German economy should Russian gas supplies fail completely.
The mood in industry and trade was gloomy. “The chemical industry in particular is extremely concerned,” explained Fuest. In chemistry, the use of gas is of great importance. Wholesalers and retailers are also “extremely worried” about the coming months. The service providers and the construction industry, on the other hand, were somewhat more confident. “Hospitality is having a good summer.”
Bank economists assessed the deterioration in sentiment in view of the economic problems as moderate. “In view of an endangered energy supply, record-high inflation rates and disrupted production chains, it is astonishing that the mood in companies is staying at this level,” explained Ulrich Kater, chief economist at Dekabank. “The deterioration in expectations clearly shows that the main challenge for companies is the energy supply in the coming winter.” All in all, the German economy can probably do no more than stagnate this year.
Jörg Krämer, chief economist at Commerzbank, was also pessimistic. “In fact, the economic situation is unstable.” On the one hand, a further reduction in Russian gas supplies could lead to gas rationing in industry with serious consequences. On the other hand, the US Federal Reserve’s massive interest rate hikes are likely to trigger a recession in the coming year. As a result, Commerzbank has reduced its growth forecast for Germany from 2.5 to 1.0 percent in the coming year. For this year, the Commerzbank economists continue to expect growth of 1.5 percent. (dpa)