German business morale falls on manufacturing 'bottleneck recession'

German business morale falls on manufacturing 'bottleneck recession'
German business morale falls on manufacturing 'bottleneck recession'   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<div> <p><span class="caps">BERLIN</span> -German business morale fell for the third month running in September, hit by supply chain problems that are causing a “bottleneck recession” for manufacturers in Europe’s largest economy, a survey showed on Friday.</p> <p>The Ifo institute said its business climate index fell to 98.8 from an upwardly revised 99.6 in August. A Reuters poll of analysts had pointed to a September reading of 98.9.</p> <p>“Problems in the procurement of raw materials and intermediate products are putting the brakes on the German economy,” Ifo President Clemens Fuest said in a statement.</p> <p>“Manufacturing is experiencing a bottleneck recession.”</p> <p>Adding to the uncertainty facing Germany’s economic outlook, the country votes in a national election on Sunday, after which Chancellor Angela Merkel plans to stand down. With the vote fractured, there are multiple potential coalition outcomes https://reut.rs/2ZeqYw3.</p> <p>On Wednesday, Ifo said it had cut its growth forecast https://reut.rs/3nU3Ux5 for the German economy for this year as supply chain disruptions and a scarcity of chips and other intermediate goods were slowing down the recovery from the <span class="caps">COVID</span>-19 pandemic.</p> <p>The institute now sees Germany’s gross domestic product (<span class="caps">GDP</span>) growing 2.5% this year, down 0.8 percentage points from its previous forecast, and 5.1% next year, up 0.8 points.</p> <p>The weaker-than-expected rebound in 2021 follows a 4.6% plunge of overall economic output in 2020 caused by coronavirus restrictions on public life and business activities to contain the spread of the highly infectious disease.</p> <p>A separate survey published on Thursday showed Germany’s economic recovery from the pandemic lost momentum https://reut.rs/3hXp2yy in September as activity in both the manufacturing and services sectors slowed amid supply bottlenecks and waning catch-up effects.</p> <p>The government, which so far has been forecasting growth of 3.5% for this year and 3.6% for next, will update its estimates in October.</p> <p>A survey by the <span class="caps">VDMA</span> engineering industry association published last week showed most German mechanical engineering firms were facing noticeable or serious supply chain problems, with production growth expected to be affected next year.</p> </div>