SMM News: German business confidence worsened for the third month in a row in June, falling to its lowest level since November 2014, solidifying expectations that the German economy will shrink in the second quarter, according to a survey released on Monday.
Ifo, a German think-tank, said the index of business sentiment fell to 97.4 in June from 97.9 in May, having previously but slightly above market expectations of 97.2.
"the German economy is in the doldrums," said Clemens Fuest, president of Ifo, adding that both manufacturing and services sentiment indicators performed badly.
After nine years of growth, the German economy is in trouble, the global economic cooling has hurt export-dependent manufacturers, and the UK's postponement of Brexit has created uncertainty.
The Bundesbank said this month that it expected the economy to shrink slightly in the second quarter, following 0.4 per cent growth in January-March. The government halved its growth forecast for 2019 to 0.5%, compared with 1.5% in 2018, the lowest level in five years.
(Klaus Wohlrabe), an economist at Ifo, said he did not expect a recession, and many analysts shared that view.
"overall, we expect the German economy to slow slightly above slow growth in the second quarter." Capital Economics's Christina Iacovides wrote in a report.
"afraid of losing."
One index, which measures managers' assessment of the state of the business itself, rose slightly, while the other, which measures expectations, fell to its lowest level since February.
This shows that the business judgment index has fallen to a level that has not been seen since the European debt crisis.
"fear of losing. This is the best summary of the current situation of German companies, "ING's Carsten Brzeski wrote in a report.
The service sector, which is firmly supported by the domestic economy, has been providing momentum at a time of industrial contraction, but some economists worry that the manufacturing recession could spread.
Germany's economic growth has been dependent on private consumption, a cycle supported by a strong labour market, low interest rates and rising wages. Another data released on Monday showed that real wage growth slowed in the first quarter, which could dampen Germany's desire to spend.
Increased government spending has also helped support economic growth, but critics of the left-right coalition led by German Chancellor Angela Merkel say the coalition could rely on borrowing to provide more momentum. Business lobby groups have urged Ms Merkel to cut corporate taxes, with some economists accusing her of being too complacent about the economy.
Germany's finance ministry said on Monday that the government would stick to its policy of not adding new debt until 2023, but planned to increase public spending by 1 per cent next year.
Brzeski said he expected the service sector to continue to provide momentum for the economy as a whole, while the manufacturing slowdown would bottom out.
He added that the ECB's decision not to raise interest rates next year and open the door to cutting interest rates or buying more bonds could consolidate consumption as the main driver of German economic growth.
"German industry is expected to bottom out and rebound." "the ECB's recent shift to a more dovish attitude shows that new domestic investment financing conditions will remain favourable," Brzeski said. However, let us be clear that the bottom rebound is still a long way from a strong rebound. "
Scan QR code and apply to join SMM metal exchange group, please indicate company + name + main business