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Signs of an increasingly serious crisis are coming from Germany

Signs of an increasingly serious crisis are coming from Germany

According to the Ifo Institute, the BMI value in December was 86.4, which is lower than the expected value of 87.8 based on an analyst survey conducted by Reuters. This follows November’s revised reading of 87.2, indicating a continuation of the downward trend.

Clemens Fuest, head of the Ifo Institute, commented on the situation, saying: “As the year draws to a close, the German economy remains weak.” This sentiment was also confirmed by companies, who expressed their dissatisfaction with the current situation. The index measuring current conditions fell to 88.5 from 89.4 in November.

Looking to the first half of 2024, companies were also more pessimistic, with the expectations component falling to 84.3 points in December from 85.1 in November.

Speaking to Reuters, Klaus Vollrabe, head of surveys at Ifo, identified the decline in consumer and external demand as a major problem for the German economy. He also noted that according to the data, a slight contraction in GDP can be expected in the fourth quarter.

This potential contraction comes on the heels of the already confirmed decline in German GDP in the third quarter. If this trend remains negative for two consecutive quarters, the German economy may technically enter a state of recession.

According to Commerzbank, the drop in the Ifo business confidence index is like an unexpected cold shower. According to the bank’s analystsz The subcomponents of the Ifo Business Climate Index, especially business expectations for the next six months and assessment of the current business situation, showed a decline, making a recession increasingly likely. A slight contraction in GDP is expected for the winter, and a further decline of 0.3% is expected throughout 2024. Although these forecasts differ from the consensus, which expects a 0.4% increase, Commerzbank notes that the consensus may It has gradually approached its forecast in recent months.

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Cover photo: A ship under construction at the factory of MV Werften, which recently built several river cruises for the US company Crystal River, in Wismar, Germany, on August 3, 2017. Image source: EPA/Getty Images

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