Germany: Business sentiment worsens in July
Business sentiment dropped to 88.6 in July from 92.2 in June. As a result, the index remained entrenched below the 100-threshold, indicating prevalent pessimism among German businesses.
The headline deterioration reflected worsening views on expectations and the current situation. Higher prices for energy and a potential gas shortages are weighing on the economy, which could tip into recession. Looking at the sectors, sentiment soured across the board.
Carsten Brzeski, global head of macro at ING, commented:
“The outlook for the German economy is anything but rosy. Currently, in the base case scenario with continuing supply chain frictions, uncertainty and high energy and commodity prices as a result of the ongoing war in Ukraine, the German economy will be pushed into a technical recession. To make matters worse, the current dry weather has reduced water levels in the main rivers close to their 2018 levels, when low water levels led to the disruption of supply chains. All of this makes for a perfect storm in the second half of the year.”