German Business Morale Falls by More than Expected in September - Ifo

The data from German Ifo institute showed that business sentiment fell further in September, warning that the economy is heading into recession.

The Ifo business climate index fell to 84.3 in September, the lowest since May 2020, dropping from upwardly revised 88.6 in August and strongly disappointing expectations for decrease to 87.0 in September.

Much weaker than expected numbers reflect the downturn in all sectors of the German economy and boost pessimism.

Germany is facing a tough period in coming months, as energy shortage threatens that the industry may slow significantly or stop completely that will have a domino-effect on the whole economy.

Additional strong warning signals come from high inflation which is expected to rise to new record high at 9.5% in Germany in September from 7.9% previous month with more headache expected on the fact that inflation is becoming increasingly broad that would make the European Central Banks task to bring rising prices under control, much more difficult.

As a result, a significant slowdown in the economic activity is expected in the third and fourth quarters, with fears that growth, already slowed to crawl, may hit the zero rate that would add to recession signals.