Business confidence in Germany has fallen to its lowest level in three years, as rising interest rates and extreme energy price volatility continue to stoke fears about the health of Europe's largest economy.
According to the latest Business Climate Index published on Friday by the Ifo Institute, a Munich-based think tank, business confidence in Germany fell to 85.7 this month, down from 87.4 in July: the fourth consecutive monthly decrease, and the lowest score since August 2020.
"Companies are increasingly pessimistic about the months ahead," Ifo noted. "The German economy is not out of the woods yet."
The report also highlighted "starkly pessimistic" business sentiments in the country's manufacturing sector, as well as a "notable cooling" in the services sector and a "continuing nosedive" in the construction industry.
Nicht so gut
Ifo's report came on the same day that the Federal Statistical Office of Germany (Destatis) confirmed that the country's economy stagnated in the second quarter of this year.
The announcement follows Germany's contraction over the previous two quarters, falling by 0.1% over the first three months of this year and by 0.4% in the fourth quarter of 2022. A recession is technically defined as two consecutive quarters of negative growth.
"Both the short-term and the longer-term outlook for Germany looks anything but rosy," ING analyst Carsten Brzeski told Reuters.
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Brzeski's words were echoed by The Economist, which recently reported that Germany's "economic ailments are more serious than its politicians admit".
"Germany's vaunted economic model and state look unable to provide the growth and public services people have come to expect," the magazine noted. "Germany's problems seem likely to last for a while."
It added that a shortage of skilled workers, rising interest rates, slowing Chinese demand, and the war in Ukraine have all combined to potentially render Germany "the sick man of Europe once more".
Germany's struggling economy is also likely to have a significant long-term impact on Belgium. According to a recent analysis by Lloyds Bank, Germany is Belgium's biggest export market and its second-largest import supplier.
