The mood in the German economy clouded over in May for the first time in six months. The Ifo business climate fell by 1.7 points to 91.7 points compared to the previous month, as the Ifo Institute announced on Wednesday in Munich. The most important German economic barometer had previously risen for six months in a row. According to experts, the damper in the Ifo index is not an outlier. They don’t want to rule out a recession in the second half of the year.
“The German economy is skeptical about the summer,” said Ifo President Clemens Fuest, commenting on the results of the survey of around 9,000 companies. On average, analysts had expected a decline and an index value of 93.0 points.
The companies surveyed rated their future business significantly worse. Here, the corresponding index value for business expectations fell to 88.6 points in May, after 91.7 points in the previous month. Companies also rated the current situation less positively in May.
According to Jörg Krämer, chief economist at Commerzbank, the current development is not an outlier. He referred to other important leading indicators and incoming orders, all of which have recently clearly moved downwards.
Impending decline in gross domestic product
In the second quarter, the German economy is threatened with a decline in gross domestic product, commented analyst Andreas Scheuerle from Dekabank on the Ifo data. He referred to the interest rate hikes by the central banks in the fight against high inflation. “The rapid rise in global interest rates is also having a negative impact on the economies of important trading partner countries such as the USA and Great Britain. That reduces German export successes,” said Scheuerle.
However, analyst Ulrich Wortberg from Landesbank Hessen-Thüringen referred to the still robust situation in the services sector. This could help avoid a recession in the German economy. Wortberg even considers an economic recovery to be possible later in the year. (dpa)