German Business Confidence Weakens Further Signaling Long Stagnation

(RTTNews) - Business sentiment in Germany deteriorated for a third month in a row in August as companies judged their current situation as worse and turned more pessimistic regarding the outlook, survey results from the ifo Institute showed Monday. The ifo business confidence index fell to 86.6 from 87.0 in July. Economists had forecast the measure to drop to 86.0.

The latest reading was the weakest since February, when it was 85.7.

The current conditions index of the ifo survey dropped for a second straight month, down to 86.5 from 87.1. The score was in line with economists' expectations.

The expectations measure slid to 86.8 from 87.0, marking the weakest reading since February. Expectations eroded for a third month in a row, but the score was just above the forecasted 86.5.

"The sentiment among companies in Germany is on a downward trend," ifo Institute President Clemens Fuest said.

"The German economy is increasingly falling into crisis," Fuest added.

Significant erosion of confidence was witnessed among the German manufacturers and sentiment also weakened in the services sector. Expectations fell in both sectors. Morale improved in the trade sector after weakening for two months as expectations were less pessimistic. Business sentiment was unchanged in the construction sector as firms were somewhat satisfied with the current situation but were less upbeat regarding the outlook.

"The German economy will barely grow in the second half of this year and will at best stagnate for the year as a whole," Commerzbank economist Ralph Solveen said.

"Most growth forecasts for the coming year are still likely to be too high. We expect a meagre increase of 0.5 percent for 2025."

ING economist Carsten Brzeski said the continuing decline in the Ifo index is another illustration of the German economy's never-ending stagnation.

"Still, and as depressing as this new wave of falling sentiment indicators is, don't rule out potential positive surprises in the second half of the year," Brzeski said.

"While the highest increase in real wages in more than a decade could still open German consumers' wallets, despite increasing job loss fears, it is industrial production that could still come to the rescue."