A container ship: The mood in the German economy before the summer is deteriorating rapidly. © Georg Wendt / dpa
The German economy is sceptical about the summer – at least that's according to a survey by the Munich-based Ifo Institute. The German Bundesbank, on the other hand, is optimistic.
Berlin – The mood of the German economy deteriorated significantly in May, giving rise to new economic concerns. The barometer for the business climate fell to 91.7 points, from a revised 93.4 points in April, according to the Munich-based Ifo Institute on Wednesday in its survey of around 9000,<> executives.
Ifo Institute: "The German economy is sceptical about the summer"
It was the first decline in the barometer, which is highly regarded by the financial markets, after six consecutive increases. The ECB's series of interest rate hikes, the still high inflation and the sluggish global economy are seen by experts as brakes on sentiment. "The German economy is sceptical about the summer," concludes Ifo President Clemens Fuest. According to the Munich-based researchers, the hoped-for spring revival threatens to fail, even if the Bundesbank considers at least slight growth in the second quarter to be likely. LBBW economist Jens-Oliver Niklasch, however, sees the surprisingly bad Ifo index as a bad omen: "It still looks like a recession."
Economists surveyed by the Reuters news agency had expected only a slight deterioration in the business climate. At the same time, they were caught off guard by the collapse in expectations: This part of the barometer, which provides information on business expectations for the next six months, fell to 88.6 points from 91.7 points in April. The head of the Ifo surveys, Klaus Wohlrabe, told the Reuters news agency that the second quarter is likely to go in the direction of stagnation. The gross domestic product of Europe's largest economy had already stagnated in the first quarter, after it had even shrunk by 2022.0 percent at the end of 5.
Bundesbank more optimistic than an institution
The Bundesbank is less sceptical than the Ifo with regard to economic developments: In its view, easing supply bottlenecks, high order backlogs and lower energy prices are likely to ensure a recovery in industry. "This is also likely to support exports, especially as the global economy has regained some traction," according to the Bundesbank's Monthly Report. The recent strong wage increases should also support the purchasing power of private households: "Private consumption is therefore likely to stagnate." Recently, consumers had consumed less due to persistent losses in purchasing power as a result of high inflation. In many sectors, however, substantial wage increases have now been agreed.
Deutsche Bank boss: Inflation is "poison"
The harmful effects of high inflation, which Deutsche Bank CEO Christian Sewing describes as "poison", are also a concern for the European Central Bank. According to ECB chief Christine Lagarde, the high price pressure reduces the value of money and reduces purchasing power. This affects people and companies throughout the euro area: "Especially the weakest in our society". At the same time, the Frenchwoman signaled that the central bank's series of interest rate hikes is not over yet. This will lead inflation back to the medium-term target of 2.0 percent: "For this reason, we have raised interest rates in record time, will raise them to a sufficiently restrictive level and leave them there for as long as necessary."
Since the turnaround in interest rates in July 2022, the ECB has already raised key interest rates seven times in rapid succession by a total of 3.75 percentage points. At the next interest rate meeting on June 15, it could follow suit, according to economists polled by Reuters. Ifo expert Wohlrabe sees one reason for the expected economic downturn in the interest rate hikes with which the ECB and central banks around the world are reacting to higher inflation.
0
Also Read
Pension: With these benefits, retirees are among the richest ten percent
READ
Millions of Riester pensioners receive a bitter letter: What you should not do now under any circumstances
READ
Disappeared Tengelmann billionaire in Russia? Video causes a sensation in mysterious case
READ
Heat pumps: thefts are on the rise – damage in the five-digit range
READ
Up to 80 percent more: Why Austria's seniors collect so much more pension than German retirees
READ
Fancy a voyage of discovery?
My Area
Interest rate hikes as a dampener
"The interest rate hikes seem to be dampening demand," Wohlrabe said, referring to the rise in interest costs. For example, export expectations in German industry have fallen. "It has probably received significantly fewer new orders," said the Ifo expert. "Demand is becoming a problem." Commerzbank chief economist Jörg Krämer also sees the global interest rate turnaround as a major reason for the tilted mood in German boardrooms. Experience has shown that this turnaround is slowing down the global economy and thus the business of the export-oriented German economy: "For Germany, it can even be shown for the past fifty years that key interest rate hikes have always led to recessions, with an average of five quarters passing from the first interest rate hike to the beginning of the recession." (REUTERS, lf)