German business sentiment falls in June – Ifo

German business morale saw a decline in June, highlighting ongoing concerns about the country’s economic outlook. The Ifo Institute‘s business climate index fell to 88.6 from May’s 89.3, defying analyst predictions of an increase to 89.7, according to a Reuters poll.

Clemens Fuest, President of the Ifo Institute, noted, “The German economy is having difficulty overcoming stagnation.” The expectations index, which reflects future economic sentiment, also dropped to 89.0 in June from a revised 90.3 in May, contrary to forecasts that anticipated a rise to 91.0.

Jens-Oliver Niklasch, an economist at LBBW Bank, commented on the data, saying, “This figure is as bad as it looks,” indicating a worsening outlook despite prior hopes for improvement. He expressed uncertainty about the anticipated growth spurt in 2025, which now seems doubtful.

Despite these concerns, the Ifo Institute slightly raised its economic growth forecast for Germany to 0.4 per cent for 2024, predicting a recovery trajectory leading to 1.5 per cent growth in 2025.

However, Carsten Brzeski, an analyst at ING, cautioned that the initial optimism of the year has been replaced by a more realistic outlook, citing recent purchasing managers’ index and Ifo readings as evidence of the economy’s continued struggle.

The HCOB flash PMI for manufacturing, a significant sector comprising roughly 20 per cent of the German economy, also unexpectedly declined in June. The Ifo survey indicated that manufacturers are increasingly wary of the future, particularly due to shrinking order backlogs, although they reported a marginal improvement in current business conditions.

The Ifo index, measuring the present business situation, stagnated at 88.3 in June, falling short of analysts’ expectations for a minor uptick. This reinforces the view that Germany’s economic momentum remains lacklustre as the country grapples with ongoing economic challenges.

Attribution: Ifo Institut ,Reuters.