Sentiment in companies fell again in December
The mood in the executive suites of the German economy took a surprising turn for the worse at the end of the year. The Ifo business climate fell by 0.8 points to 86.4 points in December compared to the previous month, according to the Munich-based Ifo Institute's survey of around 9,000 managers on Monday.
Previously, there had been two increases in a row. Experts had expected an increase to 87.8 points. Companies were once again more pessimistic about their current business situation and their prospects for the coming months. "The economy remains weak even in the Christmas period," said Ifo President Clemens Fuest.
In industry, the business climate index fell noticeably. "Energy-intensive sectors in particular are struggling," explained Fuest. The mood in the service sector improved slightly. Companies reported less skepticism about the outlook for the coming six months. The business situation in the hospitality industry did improve. "However, expectations have plummeted," explained Ifo. This is likely to be due to the expiry of tax breaks at the start of 2024. In the retail sector, the mood of managers deteriorated and in the construction industry, the index even fell to its lowest level since September 2005.
"The Christmas presents for the German economy will be more modest this year," Ifo economic expert Klaus Wohlrabe told the Reuters news agency. The budget crisis following the ruling of the Federal Constitutional Court reflects the increased uncertainty of companies. Jens-Oliver Niklasch from LBBW spoke of a dampener at the end of the year.
"In recent weeks, there was actually a lot to suggest that the economic downturn was coming to an end, especially as the prospect of falling key interest rates for 2024 was shining brightly on the horizon." However, with the latest data from industry, the downside risks have once again come to the fore. "The budget ruling by the judges in Karlsruhe was probably the straw that broke the camel's back." Some companies are now likely to have taken another look at their investment plans.
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The Ifo Business Climate index, which is a key indicator of sentiments within German companies, saw a decrease in December, with the Company's executive suites reporting a more pessimistic outlook. This downturn, despite expectations of increased points, may influence some Companies to reevaluate their investment plans, potentially leading to a slower economic recovery in the new year.
Source: www.ntv.de
