ROUNDUP: Ifo business climate deteriorates significantly

MUNICH (dpa-AFX) – The mood in the German economy deteriorated significantly in September. The Ifo business climate fell by 4.3 points to 84.3 points compared to the previous month, as the Ifo Institute announced on Monday in Munich. This is the lowest level since May 2020. Analysts had expected a slowdown, but only to 87.0 points. In the previous months, the mood had mostly deteriorated.

“The German economy is sliding into a recession,” commented Ifo President Clemens Fuest. The companies surveyed rated both their current situation and the expected development as worse. The business climate also clouded over in all sectors considered, i.e. in industry, among service providers, in trade and in construction. In retail, business expectations have fallen to an all-time low, the Ifo Institute said.

The German economy is suffering from a multitude of critical developments. First and foremost is Russia’s war in Ukraine, which has greatly increased insecurity. In addition, there is the energy crisis, especially in the natural gas sector, ongoing problems in world trade and the sharp rise in interest rates of the central banks in many places. Not to forget that the corona pandemic has not yet been overcome and that burdens are mainly coming from China due to the strict anti-virus policy of the management there.

Bank economists expressed pessimism. “In the short term, due to persistently high gas and consumer prices, the uncertainty of supply, geopolitical risks and rising interest rates, there is no indication that the mood in the German economy will soon be on the road to recovery,” said analyst Ralf Runde from Landesbank Hessen-Thüringen. Hardly anything will change in the European Central Bank’s (ECB) plan to further raise interest rates. An economic downturn is accepted.

The Ifo business climate is Germany’s most important leading economic indicator. It is based on a monthly survey of around 9000 companies./bgf/jsl/stk

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