German business is getting more pessimistic as recession angst grows

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Subscribe to enjoy similar stories. German companies are feeling ever less confident, adding to concerns that Europe’s largest economy could be slipping back into recession. The Ifo Institute’s business-climate index slipped to 85.4 in September from 86.6 a month earlier, the think tank said Tuesday.

That marks a fourth straight month of worsening sentiment, and comes in below economists’ expectations for a shallower decline, according to a poll compiled by The Wall Street Journal. “The German economy is coming under ever increasing pressure," said Clemens Fuest, president of the Ifo Institute. Feelings about the current situation fell most markedly.

Expectations for the near future also darkened, though the index decreased by a little less than expected. The index for manufacturing, traditionally the powerhouse of Germany’s economy, slumped to its lowest level since June 2020. Demand is ailing in the beleaguered sector, with new orders weakening again.

“The core sectors of Germany industry are struggling," Fuest said. The figures come a day after a separate set of surveys suggested manufacturing activity ebbed to its lowest point in a year this month, dragging the wider private sector with it. A sustained lack of recovery in business activity could point to recession, defined as two straight quarters of contraction, economists warned following the release.