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German business sentiment clouds over but no sign of recession – Ifo
Global Banking & Finance Review®
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BERLIN (Reuters) -German business morale fell more than expected in June but a recession was not yet in sight despite rising energy prices and the threat of gas shortages, a survey showed on Friday.
The Ifo institute said its business climax index dropped to 92.3 following a reading of 93.0 in May, when the closely watched indicator posted a surprise recovery despite the economic impact of the Russia-Ukraine war.
A Reuters poll of analysts had pointed to a minimal fall in June to a reading of 92.9.
“Despite increased uncertainty, there are no signs of a recession at the moment,” Ifo expert Klaus Wohlrabe told Reuters. “However, the threat of a gas shortage has significantly increased uncertainty among companies.”
Not all sectors were suffering equally, as manufacturing and trade took significant hits while there was clear improvement in a services sector no longer encumbered by COVID-19 lockdowns, the data showed.
However, supply bottlenecks – which are slowing down carmakers, for example – have eased only minimally and high inflation continued to suppress consumer spending, Wohlrabe said.
(Reporting by Rachel More, Rene Wagner and Miranda Murray;Editing by Paul Carrel)
Business morale refers to the overall confidence and attitude of business leaders and employees regarding the economic environment and their company's prospects. It can influence decision-making and investment.
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in GDP, income, employment, manufacturing, and retail sales.
Supply bottlenecks occur when there are delays or shortages in the supply chain that hinder the production process, leading to reduced output and potential economic impacts.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to stabilize the economy.
The Ifo business climate index is a key economic indicator that measures the current business conditions and expectations of companies in Germany, providing insights into economic trends.
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