Germany's business climate falls in June: No Euro 2024 fairytale?

Sentiment among German companies declined more than anticipated in June, marking the first month-over-month drop since December 2023, the ifo Institute has reported.

The monthly survey of around 9,000 German firms in manufacturing, services, trade, and construction revealed that the ifo Business Climate Index fell from 89.3 points in May to 88.6 in June, missing economists' expectations of a rise to 89.7.

The overall confidence decline was primarily driven by worsening business expectations for the next six months. The expectations gauge fell from 90.4 in May to 89 in June, falling short of the predicted 91. The index for current conditions remained steady at 88.3, marginally missing the expected 88.5.

In manufacturing, the business climate fell after three consecutive months of improvement, with companies becoming more cautious about the future.

In the service sector, the index increased. Service providers evaluated their situation more positively, and the outlook for the second half of the year also continued to improve.

In trade, the business climate worsened significantly due to growing skepticism about the future. In contrast, the construction sector saw a slight rise in its index, driven by less pessimistic expectations, although a lack of orders continues to be a major issue.

"The German economy is having difficulty overcoming stagnation," the ifo wrote.

Last week, the ifo Institute modestly increased its economic growth forecast for Germany in the second half of 2024.

For the full year 2024, the German economic research institute anticipates a 0.4% growth, an improvement from the 0.2% contraction in 2023. This represents a 0.2 percentage point increase from the ifo's spring 2024 forecast. Meanwhile, Germany's economy is