Dark prospects for the German economy

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Dark prospects for the German economy
Photo: Martin Meissner AP/TT

The German business climate is the worst since February and the recovery in Europe's largest economy has stalled, shows a monthly index from the German analysis institute Ifo. "A crisis situation", says the Ifo chief in a comment.

Confidence in the future sank according to Ifo to 86.8 in August, down from revised 87.0 the previous month. The decline was certainly somewhat smaller than expected, but it comes with a sub-index for the view of the current situation in the German economy, which is also falling.

"The German economy is increasingly falling into a crisis situation," says Ifo chief Clemens Fuest according to a press release.

Expectations for economic development are pointing downwards both in the service sector and in manufacturing, according to Ifo's measurements.

The German economy contracted by 0.1 percent during the second quarter, and the so-called purchasing managers' index for August remained below the 50-line, indicating decreased activity in the economy.

An index from the Zew Institute fell earlier in August to its lowest level since January, and the German central bank Bundesbank – part of the European Central Bank (ECB) – has warned of persistent weak development for manufacturing as the German industry is currently in a tough competitive situation.

The ECB has flagged that the key interest rate in the eurozone may be lowered in September following the cut in June.

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