Another poor reading in Germany’s business sentiment this month points to the likelihood that Europe’s biggest economy may still be stuck in recession, according to Ifo President Clemens Fuest.
(Bloomberg) — Another poor reading in Germany’s business sentiment this month points to the likelihood that Europe’s biggest economy may still be stuck in recession, according to Ifo President Clemens Fuest.
“It looks like the German economy is really having a hard time getting out of this recession,” he told Bloomberg Television’s Manus Cranny on Tuesday. “The data coming in today suggests we’re still in recession.”
Fuest spoke after his institute’s highly watched business climate index fell for a third month. An expectations gauge by the Munich-based Ifo also declined to 83.5 in July from a revised 83.8 in June — a touch more than economists in a Bloomberg survey estimated.
Germany succumbed to the first downturn since the pandemic over the winter, a consequence of Russia’s war in Ukraine and, more recently, underperformance by its outsized manufacturing industry. Fuest’s analysis of a persisting recession would jar with the forecast of economists, who reckon growth has resumed again, albeit slowly.
A business survey by S&P Global published Monday showed a contraction in private-sector activity in Germany for July, signaling recession risks persist. In particular, it noted the fastest decline in new orders and backlogs in manufacturing since Covid-19 emerged in 2020.
An initial verdict on second-quarter gross domestic product is due from Germany’s statistics office on July 31. In the meantime, headwinds may grow stronger, with the European Central Bank likely to raise interest rates by another a 25 basis points on Thursday, with no clear guidance on what it will do next.
Fuest said he would support a pause in tightening.
“It would be wise to halt and wait for more data to come in before the ECB hikes again,” he said. “I think it’s very likely that this is what they’re going to do.”
–With assistance from Joel Rinneby and Kristian Siedenburg.
(Updates with Fuest comments starting in first paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.