As of: January 25, 2024, 12:30 p.m
By: Lisa Mayerhofer
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The mood among entrepreneurs in Germany deteriorated further at the beginning of the year.
The Ifo business climate falls to its lowest value since May 2020.
Berlin - The start of the new year is rather bumpy from an economic perspective: the mood in the executive suites of German business has surprisingly deteriorated and is increasing concerns about recession.
The Ifo business climate fell to 85.2 points in January from 86.3 points in the previous month, as the Munich Ifo Institute announced on Thursday in its survey of around 9,000 managers.
Ifo President: “The German economy is stuck in recession”
This is the lowest value since May 2020. Experts surveyed by Reuters, however, had expected 86.7 points.
Companies assessed their current business situation and their prospects for the coming months worse than before.
“The German economy is stuck in recession,” said Ifo President Clemens Fuest.
The mood in the upper echelons of German business has surprisingly deteriorated and is increasing fears of recession.
(Symbolic image) © Jan Woitas/dpa
According to Ifo expert Klaus Wohlrabe, the survey suggests that the economy is likely to shrink slightly in the first quarter - by 0.1 or 0.2 percent.
Uncertainty in the executive suites increased significantly at the beginning of the year.
This is primarily due to the economic policy course in Germany.
“The companies do not see a clear line in economic policy,” said Wohlrabe.
“It affects the mood.”
Commerzbank chief economist “Most economists are still too optimistic”
According to the recently updated forecast by Munich researchers, German gross domestic product (GDP) is expected to increase by only 0.7 percent this year, also slowed by the federal government's austerity measures.
Some experts are even more pessimistic than the Ifo Institute and expect GDP to shrink in 2024 as well - including Commerzbank chief economist Jörg Krämer, who has a minus of 0.3 percent on the list: “Most economists are still too optimistic.”
The purchasing managers' index from the financial services provider S&P Global also indicated a false start to the new year, signaling an accelerated decline in the economy.
One bright spot, however, is that the German economy's supply chains have not broken despite the Houthi rebels' attacks on container ships in the Red Sea.
“So far they have not led to delivery bottlenecks for raw materials and intermediate products,” said Wohlrabe.
(lma/Reuters)