Germany: Business confidence drops to over six-year low in July
July 25, 2019
Business sentiment among German firms sank to an over six-year low in July with the ifo Business Climate Index dropping to 95.7 from a revised 97.5 in June (previously reported: 97.4). The headline figure reflected a deteriorating view on the economic climate in the months ahead as well as a swing from optimism to pessimism regarding the outlook on the current situation. “The German economy is navigating troubled waters”, Clemens Fuest, President of the ifo Institute, noted.
Sector-level sentiment showed a broad-based deterioration in confidence. Goods producers’ outlook on the current situation fell at the sharpest pace in over a decade, while manufacturers’ pessimism increased regarding the expected climate in the months ahead. The manufacturing sector is currently suffering from a host of factors, chief among which are the struggling automotive industry amid slowing Chinese growth and lingering trade tensions around the globe. The services sector also recorded reduced satisfaction with the current climate, while expectations entered pessimistic territory for the first time in a decade. In the trade sector, sentiment fell markedly owing to companies’ less positive assessment of the current situation and marked skepticism regarding the coming months. The sole exception to the doom and gloom was the construction sector, sentiment improved in July on the back of a more upbeat view on the economic climate in the months ahead; the current situation was assessed somewhat less positively, however.
The chief economist of ING Germany, Carsten Brzeski, commented that “the German economy increasingly looks like a racing cyclist who has been on solo breakaways from the Eurozone peloton for a long while but is now running out of energy. […] There are tentative signs that the industrial downswing has started to leave some marks on the domestic economy, which up to now had been very resistant to external weaknesses.”
Author: Jan Lammersen, Economist