Germany is on the brink of recession

“Germany is on the brink of recession”, warned this Monday the IFO, the country’s main economic think tank, which periodically publishes a survey of entrepreneurs.

“Germany is on the brink of recession”, warned this Monday the IFO, the country’s main economic think tank, which periodically publishes a survey of entrepreneurs. This time, these entrepreneurs “indicated that they anticipate a significant deterioration of conditions in the coming months”, which portends “uncomfortable times” for the largest European economy.

Activity in the industrial sector “declined sharply”, raising levels of pessimism in that sector to the lowest levels that marked the beginning of the pandemic. In the services sector, “the business climate [also] has deteriorated significantly”.

Germany faces uncomfortable times,” summarizes the think tank.

Companies, according to the IFO, recognize that it is very difficult to predict the near future, which is in itself a factor that penalizes investment. “High energy prices and a shortage of natural gas are already taking a toll on the economy,” says IFO chief economist Klaus Wohlrabe.

On Friday, advanced data for the largest European economies indicated that activity in the eurozone contracted in July, which happened for the first time since the pandemic confinements. The scenario was outlined by the so-called purchasing managers’ indexes (PMI) released by the S&P – the index not only came out worse than economists had predicted but also fell below the 50-point threshold, which signals a contraction in activity and fuels fears of recession.

A recession is usually defined as two consecutive quarters of decline in economic output in a chain, that is, in the comparison between a quarter and the immediately preceding quarter.

Source: With Agencies

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