Unexpectedly Gloomy in Germany - Forecast Slashed

The German business climate deteriorates for the fourth month in a row and the decline is greater than feared, according to a monthly index from the analysis institute Ifo. At the same time, leading economic institutes in Germany are lowering their growth forecast for 2024 and 2025.

» Published: September 24 2024

Unexpectedly Gloomy in Germany - Forecast Slashed
Photo: Michael Probst AP/TT

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After Ifos unexpectedly gloomy September index, news agency Reuters reports that Germany's leading economic institutes have lowered their forecast for the German economy this year. They now expect Germany's GDP to shrink by 0.1 percent in 2024.

The growth forecast for 2025 is also being lowered to 0.8 percent, from previously 1.4 percent.

Index falls more than expected

Reuters refers to anonymous sources ahead of the publication of the new forecast on Thursday.

The Ifo index, which measures the mood in the German economy, fell to 85.4 in September – down from 86.6 in August. Analysts had on average expected a decline, but only to 86.0, according to a compilation of forecasts made by Bloomberg.

The sub-index for the current situation fell to 84.4 from 86.4. Analysts had also on average expected 86.0 for this sub-index.

For the manufacturing industry, the mood is now the worst since 2020, according to Ifo chief Clemens Fuest.

The core of German industry is facing headwinds

"Companies assess their current situation as significantly worse. Expectations are also significantly more pessimistic. The lack of new orders has intensified," he writes in a comment.

He adds that it is the core of German industry that is now facing headwinds.

The service sector also sees a worse situation now than before, but is not quite as negative about future prospects. And the mood in the tourism industry has improved, according to Ifo.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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