German business sentiment brightens in February: Ifo

GERMAN business morale improved in February, a survey showed on Friday (Feb 23), though probably not enough to prevent Europe’s biggest economy from slipping into another recession.

The Ifo institute said its business climate index rose to 85.5 from 85.2 in January, as expected by analysts in a Reuters poll.

“The German economy is stabilising at a low level,” said Ifo president Clemens Fuest.

Germany has struggled since Russia’s 2022 invasion of Ukraine pushed up energy costs, and its vast, industry-heavy economy is now in its fourth straight quarter of zero or negative growth, weighing on all of the eurozone.

Germany’s gross domestic product (GDP) shrank by 0.3 per cent in 2023, making it the world’s worst performing major economy.

It is broadly expected to enter another technical recession in the first quarter of this year, after shrinking by 0.3 per cent in the final quarter of last year, the federal statistics office said on Friday, confirming an initial estimate.

Ifo expert Klaus Wohlrabe told Reuters that signs pointed to a slight decline in first-quarter GDP.

The rise in sentiment was due to slightly less pessimistic expectations, with that index rising to 84.1 in February from 83.5 in January, largely in line with forecasts for 84.

“Astonishingly unspectacular,” said LBBW senior economist Jens-Oliver Niklasch of the Ifo findings.

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“Economic output in the first quarter is more or less treading water. If things are to pick up, expectations in the coming months should brighten more than we have seen so far.”

The index assessing the current situation was unchanged in February at 86.9, slightly above forecasts.

The German government on Wednesday slashed its economic growth forecast for this year to 0.2 per cent from its previous estimate of 1.3 per cent as weak global demand, geopolitical uncertainty and persistently high inflation put a brake on recovery hopes. REUTERS