Business confidence in Germany fell in December and reached a record low value, a new study shows.
The confidence barometer of the Ifo institute, based on a survey of around 9,000 companies, has dropped to 84.7 points from 85.6 points in November.
The indicator is at its lowest level since May 2020, when Europe was recovering from the consequences of the work stoppage due to the pandemic.
"The weakness of the German economy has become chronic," said Ifo president Clemens Füst.
Companies in Germany assess the current situation as good, but are more pessimistic about the prospects for the largest European economy.
Sentiments in the key production sector continue to move downward. The companies are "less satisfied" with the current conditions and "significantly more gloomy" for the future.
According to Ifo, the number of orders has decreased, due to the announcement of production cutbacks.
In the service sector and in trade, confidence is still deteriorating. Only in the value sector, the general confidence in enterprises has improved.
Government forecasts show that Germany, which is experiencing difficulties in industry, is approaching its second consecutive year of recession.
Manufacturers "have no light at the end of the tunnel, which is why the year-long downward trend in production is now increasingly leading to job cuts," said Philip Scheuermeier, an analyst at public lender KfW.
"It is doubtful whether the easing of the monetary policy alone can reverse the course of events," he said.
In recent months, the European Central Bank has made a series of reductions in interest rates against the backdrop of economic weakness in the eurozone.
Borrowing costs in the currency bloc fell from record highs, as President Christine Lagarde indicated that the ECB's monetary policy would be further loosened.
In the meantime, market analysts forecast growth in Germany and warn that economic activity may suffer even more if the newly elected US president, Donald Trump, increases tariffs on European goods. | BGNES, AFP
