German business expectations fall, dampening hope of rebound
GERMAN business expectations worsened for the first time since August, undermining hopes that a recovery in Europe’s biggest economy will take hold early next year.
An expectations gauge by the Ifo institute fell to 84.3 in December from 85.1 the previous month. Analysts had expected a slight uptick. An index of current conditions also dropped.
“Companies were less satisfied with their current business,” Ifo president Clemens Fuest said on Monday (Dec 18) in a statement. “They were also more sceptical about the first half of 2024. As the year draws to a close, the German economy remains weak.”
The country may witness a shallow recession in the second half as it continues to suffer from hesitant consumers, weak global demand and geopolitical tensions. government haggling over next year’s budget also has heightened uncertainty in recent weeks.
Business surveys by S&P Global on Friday showed private-sector activity worsening this month and pointed to further contraction. Momentum deteriorated particularly in the services sector.
The Bundesbank still expects growth to return next year, as exports recover and household incomes improve amid slower inflation. But it now predicts just 0.4 per cent expansion in 2024 – down from 1.2 per cent previously, according to a report on Friday.
The European Central Bank’s rate-hiking campaign has also weighed on Germany’s economy. Officials are now widely expected to lower borrowing several times next year, which may offer some support. BLOOMBERG
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