Ifo business climate clearly points to a downturn in the German economy – Commerzbank

“The collapse in the Ifo business climate (88.6 after 92.2) primarily reflects German companies' fear of a gas crisis. Like the purchasing managers' index, the Ifo business climate now clearly points to a downturn in the German economy”, notes Dr. Jörg Krämer, Chief Economist at Commerzbank Research in the latest Economic Briefing published on Monday.

Key Quotes:

“After Nord Stream 1 maintenance, Russia has resumed deliveries at 40% of the maximum pipeline volume. But Putin might reduce gas deliveries again sooner or later. Because that way he could make voters and politicians nervous so that they stop supporting Ukraine militarily and it becomes less difficult for Russia to prevail militarily.”

“Beyond all the uncertainty, massively increased energy prices are already a reality for German companies. According to a survey by the DIHK business association, 16% of the manufacturing companies surveyed said they were responding to higher energy prices by scaling back their production or partially abandoning business segments.”

“Due to the extensive interest rate hikes in the USA, we expect the US economy to fall into recession in the first half of next year. If the economy of this important German trading partner shrinks, this will have a negative impact on companies in this country.”

“All in all, the German economy is probably already in a downturn. Unfortunately, how bad things end up is primarily in Putin's hands. If there were a complete halt to gas supplies, a deep recession would be inevitable.”