Germany: Business confidence deteriorates further in October
The ifo Business Climate Index fell from 98.9 in September to 97.7 in October, with the index consequently dropping further below the 100-threshold that separates pessimism from optimism among firms.
The deterioration in sentiment mainly reflected worsening expectations as clouds are seemingly gathering on the horizon. This is chiefly the result of supply-side bottlenecks, particularly in the manufacturing and trade sectors. Expectations in the services sector also worsened, but attitudes towards the current climate improved slightly. Confidence in the construction sector regarding both the present and future climate improved, meanwhile.
Carsten Brzeski, global head of macro at ING, added:
“The growth enthusiasm of the summer months has completely gone up in smoke. […] It is hard to predict when the supply chain frictions will be over. In fact, it could take until next summer before all the disruptions have been resolved and supply chains are back to normal. The same holds for energy prices. Here, we currently expect some relief after the winter. All of this means that there is not only an increasing risk that the German economy could come to a complete standstill in the final quarter of the year, there is also the clear risk that the economy will not reach pre-crisis levels this year.”