German business sentiment worsens in May

According to a poll released on Wednesday, German business confidence fell further than predicted in May, owing mostly to a steep drop in future expectations, indicating that Europe’s largest economy is suffering persistent economic headwinds.

The Ifo Institute said that its business environment index was 91.7 in May, down from 93.4 in April. A Reuters survey of experts predicted a result of 93.0 in May.

After six straight advances, this is the first decrease.

Ifo economist Klaus Wohlrabe warned on Wednesday after the institution issued its latest figures that the German economy is treading water and may stagnate in the second quarter.

In May, both components of the indicator fell: managers were significantly more pessimistic in their expectations and were somewhat less satisfied with their current situation.

“German companies are sceptical about the upcoming summer,” said Clemens Fuest, president of the Ifo Institute. The expectations indicator fell to 88.6 in May from 91.7 in April.

“The strong collapse in expectations in industry is striking,” said Wohlrabe, as expectations in manufacturing posted the largest decrease since March 2022, after the start of the war in Ukraine.