German business morale falls again in August

The sun sets behind the European Central Bank, right, and the buildings of the banking district in Frankfurt, Germany, Monday, Aug. 26, 2024. (AP Photo/Michael Probst)

Berlin, Germany — German business confidence fell further in August, a closely-watched survey showed Monday, as Europe’s biggest economy struggles to emerge from a weak period.

The Ifo institute’s confidence barometer, based on a survey of around 9,000 companies, declined to 86.6 points from 87 points in July.

“The sentiment among companies in Germany is on a downward trend,” Ifo president Clemens Fuest said following the fourth consecutive fall in the indicator.

“The German economy is increasingly falling into crisis,” Fuest said.

READ: Bundesbank expects German economy to post growth in Q2

Businesses were both less bullish about the current economic environment and more pessimistic about their future prospects, according to the survey.

Confidence among companies in the manufacturing sector in particular “fell considerably”.

Businesses in the crucial sector “once again reported declining order backlogs”, according to Ifo, with the lull dragging expectations to their lowest point since February.

A hoped-for recovery has failed to materialise, after the German economy shrank in 2023.

Output unexpectedly fell again in the second quarter of the year, according to preliminary data, with the economy contracting by 0.1 percent.

“The business climate is and remains much gloomier than in previous phases in which GDP stagnated,” said Fritzi Koehler-Geib, chief economist at public lender KfW.

The weak performance could be put down to the multiplication of global crises and “transformative challenges” causing uncertainty among businesses, Koehler-Geib said.

A “moderate recovery” was still possible, she said, with consumers regaining some of their purchasing power after recent high inflation.