Germany's parliament. German business confidence has fallen to its lowest level for more than two years in the latest sign that Europe’s largest economy is teetering on the brink of recession. Photograph: David GannonGerman business confidence has fallen to its lowest level for more than two years in the latest sign that Europe’s largest economy is teetering on the brink of recession.
Germany has been hard hit by soaring prices and the Russian gas crisis, which threatens to halt production at some of the country’s industrial powerhouses over the winter months. The gloom among the 9,000 German businesses surveyed by the Munich-based think-tank was widespread. Fuest said confidence had “plummeted” among manufacturers, while it had “worsened substantially” among services providers, “took a nosedive” at retail traders and had “deteriorated” in construction.
“In the base case scenario, with continuing supply chain frictions, uncertainty and high energy and commodity prices as a result of the ongoing war in Ukraine, the German economy will be pushed into a technical recession,” said Brzeski. The drop in the Ifo index mirrored the equally downbeat results from a survey of purchasing managers, conducted by S&P Global, which showed German businesses had suffered their biggest fall in activity for more than two years in July.
The German Central Bank warned in April that an immediate ban on Russian gas imports would knock 5 percentage points off German GDP.