Sep 26, 2022 04:14AM ET
By:AnalysisWatch
Business morale in Germany fell this month to its lowest level since the early days of the pandemic, according to a survey of companies in Europe's largest economy.
The Ifo Institute's business climate gauge reading for September fell to 84.3, down from an upwardly revised mark of 88.6 in August and economists' estimates of 87.0.
It is the bleakest figure since May 2020, when the index reached 79.7.
The Ifo said the decline affects all four major sectors of the economy: manufacturing, services, trade, and construction. It added that business pessimism for the coming months has increased "significantly."
ING analysts cited rising inflation as the main driver of weakening business sentiment, saying that rising prices have increased business input costs and dampened consumer demand. Analysts warn that Germany is also approaching a "perfect storm" of challenges, with the war in Ukraine forcing the country to move away from key Russian energy imports; accelerate its transition to green technologies; and restructure supply chains.
A recession is inevitable. However, unlike previous recessions such as the financial crisis or the pandemic, the German economy does not appear to be dropping like a stone but sliding into a long winter recession, "they noted.