FRANKFURT –– It’s not a good way to ring out the year: The last time German business leaders expressed such bleak views about their situation, the country was in the throes of the pandemic.
Germany’s Ifo economics institute said Tuesday that the results of this month’s survey of domestic companies showed its headline reading declining to 84.4 points, its worst since May 2020. The measure fell well short of the estimate of 85.5 and last month’s downwardly revised 85.6 reading.
“The weakness of the German economy has become chronic,” the thinktank said.
The decline was exclusively due to a drop in the expectations component of the index, a measure for the coming six months. It fell to 84.4 points – the worst since hitting this exact mark in December 2023 – versus the forecast of 87.5 and November’s downwardly adjusted mark of 87.0.
The current conditions component surprised with a rise to 85.1 points to beat the forecast of 84.0 and last month’s 84.3 reading.
EUR/USD moved lower on the news.
The Ifo results came a day after German purchasing managers’ indices sent mixed signals. The manufacturing measure fell to a three-month low of 42.5 points versus 43.0 in November, leaving both distant from growth territory above the 50 level. Services improved to 51.0 from 49.3 last month, helping the overall composite to tick up to 47.8 from 47.2 in November.
Source: Ifo
A grim path ahead
“The Ifo Business Climate Index remained deep in recessionary territory in December, wrote Jack Allen-Reynolds from Capital Economics. “While the survey has overstated the weakness in the economy this year, the outlook is quite poor and we think Germany’s GDP will eke out only a small expansion in 2025.”
He noted that “gloomy picture” painted by the Ifo results is broadly in line with yesterday’s that composite PMI for Germany. “Both have pointed to big contractions in GDP this year that failed to materialise. But the fact that they are both so weak suggests that a significant turnaround in the economy is unlikely.”
Just last week Ifo lowered its baseline German GDP growth projection for next year to 0.4% from its previous forecast of 0.9% announced in September.
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- Economic weakness now ‘chronic’ – Ifo
- Declines follows weaker manufacturing PMI
- View of present improves
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
17 December 2024 | 09:40 GMT
FRANKFURT –– It’s not a good way to ring out the year: The last time German business leaders expressed such bleak views about their situation, the country was in the throes of the pandemic.
Germany’s Ifo economics institute said Tuesday that the results of this month’s survey of domestic companies showed its headline reading declining to 84.4 points, its worst since May 2020. The measure fell well short of the estimate of 85.5 and last month’s downwardly revised 85.6 reading.
“The weakness of the German economy has become chronic,” the thinktank said.
The decline was exclusively due to a drop in the expectations component of the index, a measure for the coming six months. It fell to 84.4 points – the worst since hitting this exact mark in December 2023 – versus the forecast of 87.5 and November’s downwardly adjusted mark of 87.0.
The current conditions component surprised with a rise to 85.1 points to beat the forecast of 84.0 and last month’s 84.3 reading.
EUR/USD moved lower on the news.
The Ifo results came a day after German purchasing managers’ indices sent mixed signals. The manufacturing measure fell to a three-month low of 42.5 points versus 43.0 in November, leaving both distant from growth territory above the 50 level. Services improved to 51.0 from 49.3 last month, helping the overall composite to tick up to 47.8 from 47.2 in November.
A grim path ahead
“The Ifo Business Climate Index remained deep in recessionary territory in December, wrote Jack Allen-Reynolds from Capital Economics. “While the survey has overstated the weakness in the economy this year, the outlook is quite poor and we think Germany’s GDP will eke out only a small expansion in 2025.”
He noted that “gloomy picture” painted by the Ifo results is broadly in line with yesterday’s that composite PMI for Germany. “Both have pointed to big contractions in GDP this year that failed to materialise. But the fact that they are both so weak suggests that a significant turnaround in the economy is unlikely.”
Just last week Ifo lowered its baseline German GDP growth projection for next year to 0.4% from its previous forecast of 0.9% announced in September.
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