Brandenburg Gate in Berlin, Germany

Germany Business Confidence September 2022

Germany: Business confidence decreases in September

Business sentiment dropped to 84.3 in September from 88.6 in August, marking the worst print since May 2020. Consequently, the index remained firmly entrenched below to 100-threshold that separates pessimistic from optimistic sentiment among German firms.

The headline deterioration was driven by more downbeat views on both the current situation and business expectations. Sentiment dropped across the board with all sectors registering a decrease.

September’s business sentiment data fuels expectations of an economic recession in Germany further.

Carsten Brzeski, global head of macro at ING, commented:

“Looking ahead, the German economy continues to approach a perfect storm. The war in Ukraine has probably marked the end of Germany’s very successful economic business model: importing cheap (Russian) energy and input goods, while exporting high-quality products to the world, benefitting from globalisation. The country is now in the middle of a complete overhaul, accelerating the green transition, restructuring supply chains, and preparing for a less globalised world. And these things come on top of well-known long-standing issues, such as a lack of digitalisation, tired infrastructure, and an ageing society, to mention a few.”

Analysts at the EIU added:

“The 80% cut in flows through the Nord Stream 1 pipeline, and the lack of infrastructure to import sufficient LNG, means that Germany will have to cut its gas use dramatically over the 2022/23 winter. This enforced fall in gas use will plunge Germany into a severe recession, with GDP declining from the third quarter of 2022 through to the first quarter of 2023.”

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