German business morale sinks to start new year

BERLIN  —German business morale sank further in January, a key survey showed Thursday, as the slump in Europe’s largest economy showed few signs of passing quickly.

The Ifo institute’s closely watched confidence barometer, based on a survey of around 9,000 companies, slid to 85.2 points in the first month of the year, after falling to 86.3 points in December.

The New Year drop disappointed analysts surveyed by financial data firm FactSet, who had expected a gentle increase in the indicator.

“The German economy is stuck in recession,” said Ifo president Clemens Fuest, with companies assessing the current situation and the outlook as worse than a month before.

READ: Germany business mood sours as 2023 ends

End-of-year figures for 2023 showed the German economy had shrunk by 0.3 percent over the course of the year amid high inflation, rising interest rates and a global slowdown.

Economic outlook

“The economic start to the new year was a disappointment,” said Fritzi Koehler-Geib, chief economist at public lender KfW.

The economic outlook, however, still had some glimmer of hope, Koehler-Geib said.

READ: German economy contracted 0.3% in 2023 – stats office

“With inflationary pressure easing and real wages rising, key negative factors should ease over the course of this year and a recovery driven primarily by consumption should set in,” she said.

After a year in which Germany was at the back of the pack among the world’s major advanced economies, 2024 should see the traditional industrial powerhouse eke out “around half a percent” of growth, she predicted.

Morale in manufacturing, the backbone of the German economy, was improved to start the year, although the overall mood “remained pessimistic”, according to Ifo.

On the other side of the ledger, the mood in services as well as trade and construction clouded further.