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Germany, companies are raising yet another alarm about the crisis

There is no confidence in the recovery in Germany: the negative signal came from the expectations of German businesses, which worsened in December.
Business sentiment in the European powerhouse unexpectedly fell for the first time in four months, according to a closely watched macro indicator, offering further evidence that the economy is mired in a recession.
2024 promises to still be complicated for Berlin.
Consumers dominated by uncertainty and limited spending, weak global demand and geopolitical tensions have been undermining the relaunch of Europe's largest economy for some time now, carefully observed throughout the old continent.
While previous expectations predicted stagnation in the fourth quarter, the latest data makes a second consecutive contraction towards the end of 2023 more likely.
The skepticism that still dominates the beating heart of the German economy risks increasingly translating into less investment and a block on growth.
With disadvantages for the recovery of all of Europe.
read also In Germany, companies ask for damages for the sanctions against Russia In Germany, companies do not believe in the recovery: the data The indicator on business expectations of the Ifo institute fell to 84.3 in December from 85.1 in the month previous.
Analysts had expected a slight increase.
The Current Conditions Index also declined and the measure of business confidence was less than satisfactory, with an 86.4 below expectations for 87.8 and the previous 87.2.
“The economy is weak and we have been waiting for a recovery for a long time that will not come.
This is worrying,” Ifo president Clemens Fuest commented to Bloomberg TV.
According to Fuest, companies are less satisfied with their current activity, but also more skeptical about the situation in the first half of 2024.
The overall level of the indicator was dragged by the perennially lagging manufacturing sector, where the economic climate has decreased in significantly due to the contraction in orders and difficulties in particular for energy-intensive companies.
Trade and construction indexes also fell in December.
In contrast, the services sector, which has proven more resilient in recent months, has improved slightly, with better expectations for the next six months.
The government's complicated negotiations over next year's budget have also heightened uncertainty in recent weeks.
Olaf Scholz's government has agreed to measures including subsidy cuts and a higher carbon price to plug a hole caused by a Constitutional Court ruling last month.
While the direct impact on growth may be limited, “the problem is perhaps more that there is a lot of uncertainty about future economic policy,” Fuest said.
“What we would need is a convincing economic policy strategy to return to growth, a recovery strategy, which is completely missing.” The mix of data and forecasts for the near future currently makes Germany the weak link in a Europe struggling with still high ECB rates, the unpredictable prospects of two wars, negotiations on the fundamental Stability Pact in the EU trapped in nationalist rivalries .
read also Why Germany's economic crisis is a problem for everyone, including Italy Germany: all the unknowns for 2024 Three major German economic institutes cut their economic growth forecasts for 2024 last week, saying that the uncertainty of consumers and businesses, exacerbated by a weeks-long government budget crisis, is delaying the recovery.
The Ifo, RWI and DIW institutes all decreased their estimates by between 0.3 and 0.6 percentage points compared to previous expectations published in September.
Ifo now forecasts Europe's largest economy will grow 0.9% next year instead of 1.4%, while RWI cut its forecast to 0.8% from 1.1% and DIW lowered its its forecast to 0.6% from 1.2%.
Germany's central bank, the Bundesbank, also worsened its growth projection for the next two years last week, after previously saying it expected the economy to contract in the final three months of 2023.
Official data also confirmed that the GDP fell by 0.1% in the third quarter.
This also echoes the findings of a survey of purchasing managers conducted last Friday, which showed a decline in sentiment compared to December.
“It seems very likely that GDP will contract for the second consecutive quarter in the fourth quarter and the outlook for 2024 does not look much better,” Andrew Kenningham, chief European economist at Capital Economics, said in a research note.
The outlook for next year is deteriorating as high interest rates are denting investment in both industry and construction and consumer confidence remains low, he added.

Author: A.W.M.

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