German business sentiment worsens further in July

By Rachel More

BERLIN (Reuters) -German business morale deteriorated in July for the third month in a row, a survey showed on Tuesday, indicating that the road to recovery could be long for Europe’s largest economy as it battles to emerge from recession.

The Ifo institute said its business climate index stood at 87.3 following a revised reading of 88.6 in June. The drop was slightly bigger than forecast, with analysts polled by Reuters having expected a July reading of 88.0.

Germany slipped into a technical recession in early 2023, defined by two consecutive quarters of contraction. Preliminary data for the second quarter are expected on Friday.

“The German economy has not really got back on its feet since the coronavirus crisis,” said VP Bank chief economist Thomas Gitzel. “The problem is that cyclical uphills are not accompanied by strong GDP growth rates, but rather by fragile growth.”

A slew of other indicators have painted a gloomy outlook for Germany, where sluggish output has acted as a drag on the euro zone.

In July, S&P Global’s composite PMI index, which comprises services and manufacturing, dipped below the 50-mark, indicating a decline in activity for the first time since January and raising the likelihood of a longer recession.

A surprise jump in industrial orders in May calmed nerves only briefly, as analysts pointed to serious pressure on the sector as global demand slows.