The business climate has substantially worsened in Germany, with industries feeling increasingly concerned about the coming months, according to a survey by a German think tank released on Monday.
“Higher energy prices and the threat of a gas shortage are weighing on the economy. Germany is on the cusp of a recession,” reads the release by the Ifo Institute.
The ifo business climate index fell from 92.2 in June to 88.6 in July, the lowest point since June 2020 – the height of the coronavirus pandemic – and follows over a year of post-pandemic recovery.
Among the sectors feeling the most pessimistic about the future are manufacturing, service, construction, and trade.
The index is based on a survey of around 9,000 managers from across the German business community and measures their confidence in the current climate in comparison to a 2015 reference point.
“The massive slump in the ifo business climate survey reflects the fear among German businesses of a gas crisis,” Jörg Krämer, the chief economist at Commerzbank, told Reuters.
The EU has been sounding the alarm over Russian gas supplies with European Commission President Ursula Von Der Leyen, warning on Monday that the EU must be ready for a total Russian gas cut-off. The uncertainty triggered warnings of potential shutdowns of major industries in Germany.
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