German business confidence in the economy fell sharply in June

The Ifo Business Environment Confidence Index in Germany, which stood at 91.5 points last month, fell to 88.5 points in June, the lowest level of the year, due to the sharp deterioration in the future expectations of business executives. the company.

The Munich-based Institute for Economic Research (Ifo) published the results of the June German Business Survey, which was conducted with the participation of approximately 9,000 companies.

Thus, the Confidence Index of the Business Environment for industry and commerce in Germany, which was revised to 91.5 points in May, fell to 88.5 points this month because the expectations of company executives were significantly lower. pessimists “in the midst of the recession”. The market expectation was that the index would drop to 90.7 points.

It should be noted that the Ifo Expectations Index in Germany decreased from 88.3 to 83.6 points in June, while the Current Situation Index decreased from 94.8 to 93.7 points.

In the Ifo survey, it was stated that there was a significant deterioration in expectations for the future of the manufacturing and service sectors.

THE ECONOMY HAS ENTERED A TECHNICAL RECESSION

Ifo Chairman Clemens Fuest, in his assessment on the matter, stated that managers’ expectations were slightly more pessimistic, saying: “Firstly, weakness in the manufacturing sector is dragging the German economy into troubled waters.” .

The German economy had technically entered a recession, contracting 0.3 percent in the first quarter of the year due to the impact of unusually high inflation and rising interest rates on consumer spending.

The economy contracted 0.5 percent in the last quarter of last year.

Although the bottlenecks that arose during the Covid-19 epidemic have eased, the country’s economy is negatively affected by the stagnation of demand due to the rise in interest rates, the decrease in confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

The German government expects 0.4 percent growth in the economy this year.

The German Central Bank (Bundesbank), on the other hand, forecast on June 16 that the German economy will contract by 0.3 percent this year due to unusually high inflation, and that inflation will remain above target until 2025. (BRITISH AUTOMOBILE CLUB)