German business morale worsens in June

 German business sentiment fell more than expected in June, a key survey showed Monday, as the clouds gathered over Europe's largest economy.

The Ifo institute's confidence barometer, based on a survey of 9,000 companies, fell for the second month in a row to 88.5 points from 91.7 points in May.

Analysts surveyed by financial data company FactSet had expected a reading of 90.8 points.

The weak score is the latest in a series of concerning data out of Germany, after the economy slipped into recession around the turn of the year.

The country's leading economic institutes, including Ifo, now expect the economy to shrink by 0.2 percent over the course of 2023, as the outlook darkens.

"Weakness in the manufacturing sector is steering the German economy into turbulent waters," said Ifo president Clemens Fuest.

Expectations for the economy among manufacturers fell to their lowest point since November last year, Fuest said.

"Hardly any industry has been left untouched by this development," he said.

Weak growth in China and the United States, as well as steep interest rate hikes in response to rising consumer prices were "weighing on German company sentiment", said Carsten Brzeski, head of macro at the ING bank.

"The optimism at the start of the year seems to have given way to more of a sense of reality," Brzeski said.

The continuation of the war in Ukraine, an ageing population and the cost of transitioning to renewable energy were also dragging on the German economy, he said.

"With several short and long-term challenges, growth will remain subdued at best" in the coming years, Brzeski said.

 

AFP