German Ifo Business Confidence Weakens For First Time In 7 Months

Germany’s business confidence weakened for the first time in seven months in May as managers were skeptical about the upcoming summer amid the tightening monetary policy and mounting fears of recession in the US, survey data from the ifo Institute showed Wednesday.

The business confidence index fell more-than-expected to 91.7 in May from a revised 93.4 in the previous month. The expected score was 93.0.

The ifo index marked the first decline after six consecutive increases. This development was driven by the significantly more pessimistic expectations. Moreover, managers were somewhat less satisfied with their current conditions.

The current situation index declined to 94.8 in May from 95.1 in the previous month. The actual reading was close to economists’ forecast of 94.7.

At 88.6, the expectations index slid to a three-month low from 91.7 in April and remained below the expected 91.9.

“The first drop in the Ifo index after a six-month rally is further confirmation of fading optimism and new growth concerns” ING economist Carsten Brzeski said.

With several short and long-term challenges, growth is likely to remain subdued at best, the economist added.

In the first quarter, the economy avoided a technical recession with the gross domestic product stagnating after a 0.5 percent fall in the fourth quarter of 2022.

More detailed results for the first quarter GDP are due on May 25.

In the manufacturing sector, business confidence was much worse as expectations registered the steepest fall since March 2022, the ifo survey revealed. Managers viewed the current situation as less positive.

In services, confidence remained virtually unchanged in May. While companies were more satisfied about their current situation, they were more pessimistic about coming months.

There was a notable erosion in business confidence among traders. The current situation index turned negative after five months and skepticism regarding expectations logged a marked increase.

The business climate index in construction dropped in May due to worse assessments of the current situation. Expectations remained as pessimistic as in the previous month.

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