Index falls from 87.0 to 86.6. 86.0 expected. Analyst: No recovery anytime soon
BERLIN, Aug 26 (Reuters) – Morale at German business leaders fell for a third straight month in August, a survey released on Thursday showed, dampening hopes for an economic recovery in Europe’s largest economy.
The Ifo Institute for Economic Research said its economic sentiment index fell to 86.6 in August from 87.0 in July, but beat the 86.0 forecast by analysts polled by Reuters.
“The German economy is slipping deeper into crisis,” Ifo Chairman Clemens Fuest said.
An Ifo survey of almost 9,000 business leaders found that businesses have become more pessimistic and assess the current situation as worse off.
Ifo noted that the mood in business in particular had deteriorated significantly, with the services sector also suffering a decline.
“The German economy has fallen into stagnation,” Ifo economist Klaus Wohlrabe said, citing a lack of orders across all sectors and weak investment, adding that uncertainty about inflation was making consumers reluctant to spend.
Wolrabe predicted that German gross domestic product (GDP), which unexpectedly fell 0.1 percent in the second quarter, could fall further in the third quarter.
The index measuring the current situation fell to 86.5 from 87.1 in the previous month, while the expectations index fell to 86.8 from a slightly upwardly revised 87.0.
No reason for optimism
“There’s not much reason for optimism at this point,” said Elmer Felker of LBBW Bank.
He cited a shaky global economy, geopolitical risks and the upcoming U.S. presidential election in November as factors that dampen expectations of an economic recovery by the end of the year at the earliest.
VP Bank chief economist Thomas Gitzel also doesn’t expect an economic recovery to happen “for the time being.”
“The German economy remains in a precarious position between recession and minimal growth,” Gitzel said.
The Ifo survey was in line with the latest Purchasing Managers’ Index (PMI) data, which showed business activity contracted for a second consecutive month in August, and the contraction was larger than expected.
These are part of a series of indicators that point to sluggish economic growth so far this quarter.
Germany’s Bundesbank said last week that while the overall outlook remains weak, a recession is unlikely.
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Reporting by Klaus Lauer, Renée Wagner, Miranda Murray and Rachel Mohr; Editing by Friederike Heine and Toby Chopra
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