Since April German think tank IFO’s Business Climate Index has been on the slide from a near two-year high to a new two-year low today.
The news was an added cold shower on the German economy after the ECB’s ice bucket at the weekend. Many are attributing the turnaround to the EU’s sanctions on major trading partner Russia.
“German firms’ willingness to invest is actually restrained – that`s what I can say. Importers and exporters in contact with Russia tend to be more pessimist than companies that have nothing to do with Russia.The euro zone is still not in the starting blocks and the public administration at present does not provide the conditions that could boost private investments,” says the IFO’s Klaus Wohlrabe.
A tough fourth quarter could be on the horizon for Europe’s largest economy, which has seen growth forecast downgrades already from the IMF and OECD.
The IFO says growth will be zero for the last three months of 2014. If the Q3 figures come out in November as bad as Q2, then Germany will technically be in recession.
However German private manufacturers and consumers are bucking the trend, as their confidence is rising heading into November.