GERMAN business morale plunged in July to its lowest level in more than six years, a latest survey showed, in a further sign that a manufacturing crisis is pulling Europe’s largest economy toward recession. The data bodes ill for Germany’s export-reliant economy which has been hit hard by weaker foreign demand, trade disputes and Brexit uncertainty. The Ifo institute said its business climate index fell to 95.7 from an upwardly revised 97.5 in June. The July reading undershot a consensus forecast for 97.1. It was the fourth monthly decline in a row and the lowest level since April 2013. “The most important German economic indicator suggests that the German economy is heading toward a recession,” VP Bank analyst Thomas Gitzel said. Germany’s gross domestic product is widely expected to have shrunk in the second quarter after a solid 0.4 percent quarter-on-quarter expansion in the first three months. Another quarter of economic contraction would be a technical recession. Ifo president Clemens Fuest said the German economy was navigating troubled waters as companies were less satisfied with their current business situation. “In manufacturing, the business climate indicator is in free fall,” Fuest said, with the sub-index for the goods producing sector posting its biggest drop since February 2009. In a sign that the manufacturing recession is creeping into other sectors of the economy, business morale also deteriorated in services and trade, the Ifo figures showed. Construction was the only sector with growing optimism. The Ifo figures chimed with a survey among purchasing managers released Wednesday that showed the recession in manufacturing worsened in July with the performance of German goods producers dropping to the lowest level in seven years. (SD-Agencies) |