For Europe’s largest economy, recession has become inevitable. Ifo’s September data revealed the pessimistic picture.
Germany Ifo business climate index data, which is among the expected European data of the week, has been announced. In September, the index fell to 84.3, worse than expected. It also marked the lowest level since May 2020. The decline affects all four sectors of the economy, according to the Ifo Institute for Economic Research.
Expectations for the coming months decreased to 75.2 compared to 80.5 in August, indicating increased pessimism. Expectations in the retail sector have hit rock bottom. In addition, the evaluations of companies regarding their current situation decreased to 94.5 from 97.5 in the previous month.
Sentiment deteriorated across all sectors, with energy-intensive sectors particularly pessimistic about the coming months and nearly two-thirds of companies worried about supply bottlenecks.
“The German economy is entering recession,” Ifo said, underlining the worsening sentiment in manufacturing, services, construction and business.
Commenting on the data, economist Carsten Brzeski said in today’s note that September’s Ifo figures send more recession signals.
Stating that the German economy knows only one direction at the moment and that it is downward, Brzeski said, “The Ifo index is the latest sensitivity indicator showing that the economy has entered a winter recession.” said.
He underlined that expectations are at their lowest level since the financial crisis. He stated that the main reason for the further weakening of economic sentiment is high inflation. Arguing that the recession is inevitable, the economist explained that the upcoming recession will be different from the others with the following words:
“Unlike previous recessions, such as the financial crisis or the pandemic, the German economy is not crashing suddenly, but rather going into a long winter recession.”