German Business Sentiment Weakens With Economic, Political Clouds Ahead
The Ifo said sentiment for manufacturing and trade fell, while for services and construction it rose
Sentiment at German companies has become more pessimistic on weakening expectations for business conditions ahead, amid growing economic and political uncertainty, according to a monthly survey.
The Ifo Institute’s business-climate index fell to 88.6 in June, from 89.3 in May, data showed Monday. That was against expectations that the index would rise to 89.6, according to economists polled by The Wall Street Journal.
“The German economy is having difficulty overcoming stagnation,” Clemens Fuest, president of the Ifo Institute, said.
The decline was driven by more pessimistic expectations for the next six months, though assessments of the current situation for the German economy remained unchanged, the Ifo said. Sentiment for manufacturing and trade sectors fell, while for services and construction it ticked up.
The Ifo data comes after weakening sentiment in purchasing managers’ surveys published on Friday, dragged by worsening sentiment in the manufacturing sector.
Some of the faltering business sentiment will be down to rising risks to economic growth, perhaps spurred by increased support for populist parties at home and abroad, as the European elections at the beginning of the month showed, Fritzi Koehler-Geib, economist at KfW bank, said.
“Populism could have a particularly negative impact on an export-oriented country like Germany in the longer term,” she said, citing the French legislative election next month and the U.S. presidential vote later in the year.
However, the Ifo Institute last week also upgraded its forecast for economic growth in the country this year to 0.4%, from 0.2% under a previous March forecast, with private consumption set for a modest revival in Europe’s largest economy.