Germany’s business sentiment softened in June due to more pessimistic expectations, highlighting the hardship that the economy faces amid headwinds, survey results from the ifo Institute showed on Monday.
The business confidence index fell to a three-month low of 88.6 in June from 89.3 in May. The score was forecast to rise slightly to 89.7.
The German economy is having difficulty overcoming stagnation, ifo President Clemens Fuest said.
The decline in the business climate indicator to a very low level highlights that even after Germany’s economy grew in the first quarter, it is far from back to full health, Capital Economics’ economist Jack Allen-Reynolds said.
The economist said Germany is likely to continue growing at a slow pace. GDP is expected to grow only 0.2 percent in the whole year of 2024.
The survey showed that assessment of current situation remained unchanged, while expectations among companies deteriorated in June.
The current situation index remained at 88.3 in June compared to the forecast of 88.4.
Meanwhile, the expectations index dropped unexpectedly to 89.0 from 90.3. The reading was seen at 91.0.
Confidence among manufacturers deteriorated for the first time in four months. Companies were more skeptical about coming months as they were more concerned by the declining order backlog. Nonetheless, they were somewhat more satisfied with current business.
In the service sector, the business climate index improved in June. Service providers assessed their situation more positively. In addition, the outlook for the second half year continued to brighten.
The survey showed that the business climate deteriorated considerably in trade. Regarding expectations, skeptical sentiment strengthened notably and their assessments of current business corrected downward.
In construction, business confidence rose slightly, thanks to less pessimistic expectations. However, the current situation was assessed as worse.
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