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German business sentiment sours over gas shortage fears – POLITICO


FRANKFURT — German business morale plummeted in June amid fears rising gas prices and shortages could weigh on the economy in the second half of the year, a key survey showed on Friday.

The Ifo business climate index, based on a survey of around 9,000 companies, fell to 92.3 points in June from 93.0 points in May amid growing pessimism for the rest of the year .

“Rising energy prices and impending gas shortages are causing serious concerns for the German economy,” Ifo President Clemens Fuest said, citing a particular focus on the chemical industry, which depends greatly from Russia’s natural gas supply.

On Thursday, Berlin warned of a high risk of a long-term supply shortage due to Russia blocking gas supplies. The country has raised its national energy alert in the face of Russia’s “economic attack”.

The survey results add to the darkening picture of the German economy. The June PMI survey on Thursday showed that German economic sentiment “has lost virtually all of the momentum gained from the easing of virus-related restrictions, with growth in the services sector cooling sharply for the second consecutive month in June,” according to Phil Smith, an economist at S&P Global, which compiles the survey.

“The German economy will certainly not dive like it did during the 2020 shutdowns,” said ING economist Carsten Brzeski. “However, consumer confidence is already clearly in recessionary territory and [these readings] both suggest that the manufacturing sector is quickly following suit.”

“Stagflation for the rest of the year remains our base scenario for the German economy, and an outright recession is our risk scenario,” he added.

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