German Business Confidence Declines Further in November – Ifo
Data from the Ifo Institute revealed that Germany’s business climate index dropped to 85.7 in November, down from 86.5 in October, falling short of the 86.0 consensus forecast.
The stronger-than-expected decline in business morale worsens the outlook for Germany’s economy, which has already underperformed compared to other developed economies this year.
The biggest contributor to the drop in sentiment was a weaker assessment of the current situation, with the index falling to 84.3 in November from 85.7 in October. Business expectations also decreased slightly to 87.2 in November, compared to 87.3 the previous month.
November’s data showed that the downturn affected nearly all sectors, with the exception of trade. Retail and wholesale companies were more optimistic about the current situation and less pessimistic than in previous months.
The increase in trade is notable, especially considering that Germany could be significantly impacted if the Trump administration sparks a trade war between the U.S. and Europe. Germany’s previously robust industrial strength could become a vulnerability.
Of even greater concern is the potential impact of U.S. tax cuts and deregulation, coupled with low energy prices, which could hurt Germany’s competitiveness.
The Ifo index, which tends to reflect short-term events with a delay, also signals that risks remain elevated. The results of the U.S. elections and the collapse of the German government may still show their full impact on sentiment in the coming months.
