Germany: Recession clouds gather in Europe's largest economy
Germany's key future indicator, the IFO survey of business confidence, pointed down for the fourth month in a row as high inflation fed by astronomical natural gas prices undermines consumer pricing power and imposes heavy costs on businesses
Frankfurt: Europe’s largest economy is sending recession signals.
Germany’s key future indicator, the IFO survey of business confidence, pointed down for the fourth month in a row as high inflation fed by astronomical natural gas prices undermines consumer pricing power and imposes heavy costs on businesses.
The index compiled by the Munich-based Ifo institute dropped to 84.3 in September from 88.5 in August, to its lowest level since the global financial crisis more than a decade ago.
“High energy and commodity prices are weighing on demand and putting pressure on profit margins,” said Carsten Brzeski, chief eurozone economist at ING bank. “Companies can no longer pass through higher costs to consumers as easily as in the first months of the year.”
Company order books are shrinking, while businesses that use a lot of energy, such as bakeries, are facing costs that make them question whether they can stay in business.
The news comes as more economists predict a recession for Europe as a whole. Germany was heavily dependent on cheap natural gas from Russia, which has cut back supplies to a small fraction of what they were before the 24 February invasion of Ukraine. Gas is used to keep homes warm, run factories and generate electricity.
European officials say the cutbacks are an attempt to pressure governments out of their strong support for Ukraine and for economic sanctions against Russia.
Officials have lined up new supplies of more expensive liquefied gas that can come by ship from countries including the U.S. rather than by pipeline from Russia. But experts say Europe will still need to make a serious effort ahead of the winter heating season to conserve gas.
German Chancellor Olaf Scholz was in Saudi Arabia, the United Arab Emirates and Qatar over the weekend and signed some energy deals.
Substitutes Ritsu Doan and Takuma Asano scored in a space of eight minutes to guide Japan to a memorable win after Ilkay Gundogan's penalty had put the Germans ahead at halftime.
German Football Association president Bernd Neuendorf added that he was "irritated" by FIFA instructing participating nations to "focus on football" instead of taking a stand on issues during the World Cup in Qatar.
Much like nerves in penalty shootouts, pre-tournament problems seem traditionally less of an issue for Germany, renowned for their ability to flick the switch and perform when it truly matters.