Listen to the news

Business sentiment in Germany deteriorated in July for the third month in a row, hitting an eight-month low, according to the latest business survey by Germany's leading economic institute Ifo. Recent data suggest that the path of recovery of Europe's largest economy from the technical recession may be longer than initially expected, given sustained inflationary pressures and escalating borrowing costs.

Germany entered a technical recession in the early months of 2023 after GDP contracted in the last quarter of last year and the first quarter of this year. Preliminary GDP data for the third quarter will be announced this Friday.

The Ifo Institute's index, based on a monthly survey of about 9,87 companies and determining the level of business climate in Germany, fell in July for the third consecutive month, reaching 3.88 points from 6.2022 points in June. This is the lowest level of the index since November 88 and below the average expectations for a more moderate decrease to 0.<> points.

Germany invests $20 billion Euro for chip production in the coming years

The index of the current economic situation deteriorated sharply to 91.3 from 93.7 a month earlier, while the index determining companies' future expectations deteriorated in July to 83.5 from 83.8 points, which means that German businesses are more pessimistic about the coming months.

"In particular, companies were significantly less satisfied with their current business. Their expectations were also lower. The situation in the German economy is getting darker," said Clemens Fuest, president of the Ifo Institute.

In industry, the business climate continues to deteriorate most significantly, with the corresponding Ifo index falling in July to -14.2 from -9.7 points a month earlier, reaching the bottom of November 2022. Companies are receiving fewer and fewer new orders. The use of their production capacity fell by 1.4 percentage points to 83.0 percent, the first time in more than two years that capacity fell below its long-term average of 83.6 percent.

The business index in the service sector also weakened (to 0.9 from 2.7 points), with service providers significantly less satisfied with their current business situation. Their expectations for the coming months, however, were slightly less pessimistic, reports the latest Ifo survey.

The business climate in trade also marked a deterioration (to -23.7 from -20.2 points), with the outlook significantly clouded.

In construction, the business climate index fell to its lowest level since February 2010 (to -24.0 points from -20.5 points a month earlier). Dissatisfaction with the current situation in the sector was significantly greater, with more pessimistic prospects and expectations for the coming months.

Business climate