– by Reinhard Becker and René Wagner
Berlin (Reuters) – The mood in the German economy deteriorated significantly in May and is raising new concerns about a recession.
The barometer for the business climate fell to 91.7 points from the revised 93.4 points in April, as the Munich Ifo Institute announced on Wednesday in its survey of around 9,000 executives. It was the first decline in the barometer, which is closely watched on the financial markets, after six increases in a row. According to the Ifo Institute, the hoped-for spring revival threatens to fail. Economists surveyed by the Reuters news agency had only expected a decline to 93.0 points. “Another sign of weakness. It still looks like a recession,” warned Jens-Oliver Niklasch, an economist at LBBW.
According to the Ifo, the drivers of the negative development were significantly more pessimistic expectations. But the companies were also a little less satisfied with their current business: “The German economy is skeptical about the summer,” said Ifo President Clemens Fuest. The mood in the economy has received a significant damper.
“The German economy is treading water,” said the head of the Ifo surveys, Klaus Wohlrabe, to the Reuters news agency about the manager survey. “In the second quarter, things are likely to stagnate.” That had already happened in the first quarter Gross domestic product of Europe’s largest economy is stagnating after it even shrank by 0.5 percent at the end of 2022. The expert sees one reason for the expected slack in the interest rate hikes with which central banks around the world are reacting to higher inflation.
RATE RISE AS A DAMPER
“The rate hikes seem to dampen demand,” Wohlrabe said, referring to the rise in interest costs. For example, export expectations in German industry have fallen. “She has probably received significantly fewer new orders,” said the Ifo expert. “Demand is becoming a problem.” The German Chamber of Industry and Commerce (DIHK) is anticipating an economic downturn and high inflation for this year. There were still no signs of a broad upswing. According to a forecast by the EU Commission, Germany will be at the bottom of the table in the euro zone in terms of economic momentum, with growth in gross domestic product (GDP) expected to be 0.2 percent this year.
(Edited by Kerstin Dörr – If you have any questions, please contact our editorial team at [email protected] (for politics and the economy) or [email protected] (for companies and markets).)