• German Companies anticipate that business will become significantly more difficult in the coming months
• Slowdown is being observed across Manufacturing, Services and Trading sectors
• The ifo Business Climate Index fell to 88.6 points in July, down from 92.2 points in June, to reach its lowest level since June 2020

German business sentiment has significantly cooled. The ifo Business Climate Index fell to 88.6 points in July, down from 92.2 points in June, to reach its lowest level since June 2020, according to the ifo institute. Companies anticipate that business will become significantly more difficult in the coming months. Companies are dissatisfied with their current circumstances. Higher energy prices and the prospect of a gas shortage are putting a strain on the economy. German economy is facing signs of recession.

Germany is heavily reliant on Russia for energy. On Monday, Russian gas giant Gazprom announced a 33 million cubic metre reduction in gas deliveries via the Nord Stream 1 pipeline. Supply restrictions will go into effect on Wednesday. The current rate of gas flow into Germany is only 40%. Germany has accused Russia of employing energy as a weapon.

According to the ifo institute,  index for manufacturing has plummeted. Pessimism about the coming months has reached its peak since April 2020. This pessimism pervades almost all industries. Companies rated their current situation as worse as well. New orders are falling in comparison to last two years.

The business climate in the service sector has significantly deteriorated. The collapse was most noticeable in company expectations. Despite recent optimism in tourism and hospitality, the mood has shifted. Although service providers rated their current business as worse, the indicator remained high.

In trading, the indicator fell yet again. Businesses were dissatisfied with their current circumstances. They are also concerned about the upcoming months. At the moment, not a single retail segment is upbeat about the future.

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