German business confidence falls for third consecutive month, raising fears of recession

(MENAFN) Germany's business confidence has continued to decline for the third straight month in August, casting doubt on the prospects of recovery for Europe's largest economy. The Ifo institute's business climate index, a key indicator of economic sentiment, fell to 86.6 in August from 87.0 in July, a drop that, while slightly better than the 86.0 predicted by analysts in a poll, still underscores the mounting challenges facing the German economy. Clemens Fuest, the head of the Ifo institute, warned that the German economy is increasingly "sliding into crisis," reflecting a deepening sense of unease among businesses.

The survey, which involved around 9,000 managers across various sectors, revealed a continued decline in business confidence, with companies reporting a worsening assessment of their current situation. According to Klaus Wohlrabe, an economist at the Ifo institute, the German economy has effectively "settled into recession." He pointed to a pervasive lack of demand across all sectors and weak levels of investment as key factors contributing to the economic downturn. Additionally, Wohlrabe highlighted consumer reluctance to spend, driven by ongoing uncertainty surrounding inflation, as another critical issue hampering economic recovery efforts.

Looking ahead, Wohlrabe cautioned that Germany's GDP is likely to experience a further decline in the third quarter of the year, following an unexpected contraction of 0.1 percent in the second quarter. This ongoing economic weakness suggests that Germany may be facing more prolonged challenges than previously anticipated, with the potential for continued recessionary pressures in the coming months. 

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