Business confidence in Germany unexpectedly slumped amid growing concerns about energy supplies from Russia, companies' problems with high inflation and parts shortages.
According to the data of Ifo Institute, the rate which was 86.9 percent in May decreased to 85.8 percent in June. After recovering from the shock of Russia's invasion of Ukraine in the past two months, the confidence index turned upwards and economists expected this trend to continue.
This data has raised concerns about the outlook for Europe's largest economy, after the gas from Russia was cut further and Germany raised the risk level in its national gas emergency plan to the second stage.
Germany was the slowest growing country in the Eurozone, as momentum dropped after the shutdown, according to S&P Global's survey of purchasing managers.
“Companies are less satisfied with their current business situation than before,” said Ifo President Clemens Fuest, “Expectations have become noticeably more pessimistic. Rising energy prices and the threat of a potential disaster in natural gas have become a major concern for the German business world.
It is stated that after the inflation rate of 8.7 percent in Germany last month, consumers and companies are experiencing difficulties due to record increases in prices. The European Central Bank has also announced that it will increase interest rates in July and September, following the Bank of England and the Fed, which have increased interest rates several times before.
Economists warn that if gas shortages occur, Germany, which is more dependent on the manufacturing sector for growth than its neighbors, will have to cut production and may enter recession.
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