German Business Sentiment Falls, Indicating Recession

by Warren Seah

The latest survey from the Ifo Institute reveals that business sentiment in Germany has declined for the first time in four months, adding to the mounting evidence of an economic recession. The Ifo business-climate index dropped marginally to 86.4 in December, down from a revised 87.2 in November. Economists polled by The Wall Street Journal had anticipated a reading of 87.7, making the outcome even more bleak.

According to Clemens Fuest, President of the Ifo Institute, companies expressed reduced satisfaction with their current business situation and a heightened skepticism about the upcoming first half of 2024. Fuest summarized, “As the year comes to an end, the German economy remains weak.”

Adding to the gloomy outlook, Germany’s central bank, the Bundesbank, recently lowered its growth forecasts for the next two years. Furthermore, they predict that the economy will contract in the final three months of 2023. Official data has already confirmed a 0.1% decline in gross domestic product during the third quarter, validating concerns that Europe’s largest economy is now entrenched in a recession.

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