German business sentiment declines sharply in August

German business sentiment further declined in August, with the ifo Business Climate Index decreasing to 86.6 points from 87.0 in July.

Companies reported a worsening current business situation and more pessimistic expectations, signalling an increasing economic crisis.

The manufacturing sector experienced a significant drop in the index, with companies expressing greater dissatisfaction with the current situation and expectations falling to their lowest level since February.

Order backlogs continued to decline, particularly affecting investment goods manufacturers.

In the service sector, the business climate deteriorated further due to sceptical expectations and a slightly worsening current business situation.

Conversely, the trade sector saw a slight improvement in the business climate after two consecutive declines, driven by less pessimistic expectations. However, traders remained less satisfied with the current business situation.

The construction sector’s index remained unchanged, with companies slightly more satisfied with the current situation but slightly more pessimistic about future expectations.