The outlook for the German economy has become bleaker, with business sentiment falling for the second month in a row. Germany’s Ifo Institute revealed that the business-climate index dropped to 88.5 in June, down from 91.5 in May. Current business conditions fell to 93.7 from 94.8, and expectations for the next six months plummeted to 83.6 from 88.3. These numbers missed economists’ expectations of 90.5, and show the largest decrease since November 2022. Manufacturing was particularly hard hit, with the business climate declining significantly. Other sectors, including services, trade and construction, also saw declines in their climate indexes.
President of the Ifo Institute, Clemens Fuest, highlights that “Expectations were markedly pessimistic, and companies’ assessments of their current situations were worse,” adding that “the weakness in the manufacturing sector is steering the German economy into turbulent waters.”
The Ifo index is based on about 9,000 companies in manufacturing, services, trade and construction. However, there is optimism that an expected €130bn ($143bn) German government stimulus package introduced earlier this month will provide the necessary support for the economy to avoid a deep recession.
