German Ifo Business Sentiment Hits 8-Month Low

(RTTNews) - German business confidence deteriorated for the third straight month to hit an eight-month low in July, signaling another quarter of economic contraction and a prolonged recession this year.

The business climate index fell to 87.3 in July from 88.6 in the previous month, a monthly survey conducted by the ifo institute showed on Tuesday. The expected score was 88.0.

"The situation in the German economy is turning bleaker," ifo President Clemens Fuest said.

Companies were notably less satisfied with their current business. Expectations were also lower, the survey showed.

Business confidence deteriorated in manufacturing driven by poor assessment of the current situation. Companies were more pessimistic about future. New orders decreased further and capacity utilization dropped below its long-term average for the first time in over two years.

Sentiment among service providers also weakened in July. They were markedly less satisfied about their current situation. Their expectations for the coming months were somewhat less pessimistic, the survey showed.

In trade, business climate deteriorated due to noticeably dimmer outlook and the assessment of the current situation also weakened.

In construction, business confidence weakened to its lowest since February 2010. Contractors were dissatisfied with their current situation and they were more pessimistic over the outlook for the months ahead.

The current situation indicator posted 91.3 in July compared to 93.7 a month ago. The score was also below economists' forecast of 93.0.

The expectations index dropped moderately to 83.5 from 83.8 in June. The reading was forecast to ease to 83.4.

The ifo index confirms the picture of a 'slowcession', ING economist Carsten Brzeski said. A third straight quarter of contraction can no longer be excluded, the economist added.

ING expects the largest euro area economy to remain at a de facto standstill and to slightly shrink this year before staging a modest growth rebound in 2024.

Destatis is scheduled to publish the second quarter GDP data on July 28. The economy had contracted 0.3 percent in the first quarter and 0.5 percent in the fourth quarter and thus entered a technical recession.