German business morale slumps as winter recession looms
Reuters
Published Sep 26, 2022 04:16AM ET
Updated Sep 26, 2022 05:36AM ET
BERLIN (Reuters) - The German economy is heading for recession, the Ifo institute said on Monday, reporting a stronger-than-forecast plunge in business morale across all sectors as Germany scrambles to avoid a gas shortage this winter.
The Ifo institute said its business climate index fell to 84.3 from 88.6 in August, posting a more severe drop than the 87.0 forecast by economists according to a Reuters poll.
It was the lowest level seen since the early stages of the COVID-19 pandemic in May 2020.
Graphic: German business sentiment https://graphics.reuters.com/GERMANY-ECONOMY/BUSINESSSENTIMENT/gkvlgrmlxpb/chart.png
The downturn was visible across all four sectors of the German economy, Ifo said, adding that pessimism had increased considerably looking ahead to the coming months.
"We're seeing a fat minus on all fronts," Ifo economist Klaus Wohlrabe said. "Price expectations have risen again, with more than one in two companies announcing price increases."
In August, German producer prices rose 7.9% on the previous month, with soaring energy prices driving the trend.
The September Ifo survey points "more than ever to a recession in the winter half of the year" as the extremely high cost of energy imports makes Europe's largest economy poorer, said Commerzbank (ETR:CBKG) economist Joerg Kraemer.
"The energy price shock is causing consumer purchasing power to collapse and making production unprofitable for many companies," Kraemer said.
Russia has drastically reduced gas flows to Germany as part of an economic stand-off over the Ukraine war, sending energy bills soaring for German households and businesses and forcing the German government to consider rationing this winter.
On Monday, the OECD forecast that the German economy would contract 0.7% next year, slashed from a June estimate for 1.7% growth.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.