The upswing in the German economy continues to weaken.

The Ifo Institute's business climate index, which is based on a survey of 9,000 companies, fell by 0.8 points to 98.8 points.

The Munich institute announced on Friday.

It is the third decline in the key sentiment barometer in a row.

For the first time this year, companies were less satisfied with their current business situation.

Their expectations for the next six months also clouded over.

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The mood among industrial companies deteriorated the most. The last time there was a stronger decline was in May 2020. "The problems with the procurement of raw materials and intermediate products are slowing the German economy," said Ifo President Clemens Fuest. The industry is experiencing a "bottleneck recession". The order books are still well filled, but new orders have flattened out.

In the service sector, companies were much more confident about the future, even if they assessed their current situation somewhat worse. In the hospitality industry and tourism, a certain degree of confidence has returned after the great skepticism in the previous month. In logistics, the prospects clouded over, in line with industry. A large majority of retailers also reported delivery problems in procurement, but the sub-index remained almost unchanged. In the construction industry, the business climate improved significantly.

The survey results caused little optimism among economists. According to Commerzbank economist Ralph Solveen, the recovery of the German economy is likely to "lose steam noticeably" in the fourth quarter after another strong third quarter. Jens-Oliver Niklasch from the Landesbank Banden-Württemberg also expects a difficult fourth quarter "in which the supply chain issue could even replace Corona as the main risk." Bank house lamp.

For Ulrich Kater, chief economist at Dekabank, the decline in the Ifo business climate index is “anything but dramatic”.

It is only the delivery bottlenecks and shortages that keep companies from producing more.

“That speaks for a high investment requirement in the future.

In addition, the record-high orders are being processed, which will extend the upswing well into next year, ”he said.

Burdens on the economy are increasing

The purchasing managers' index published by the London Markit Institute on Thursday also suggests that the recovery weakened noticeably in September. After 60 points in August, the barometer sank to 55.3 points. That is the lowest value since February. Nevertheless, the value was still above the 50 point mark, which signals growth. The balance for the third quarter is also positive: On average, the index exceeded the previous quarter's value of 57.4 at 59.2 points, making it the highest value in ten and a half years.

But the burdens on the economy are increasing. "The survey suggests that the upswing in the manufacturing sector will continue to be slowed down and suffer from supply bottlenecks and rising costs," said Markit economist Phil Smith. In addition, the service sector recorded its smallest increase since May, as the surge in demand continued to decline as a result of the corona easing.

In the meantime, all five major economic research institutes have revised their forecasts for the current year downwards, in some cases significantly.

The most optimistic is the RWI in Essen, which expects the gross domestic product to rise by 3.5 percent.

This is followed by the Kiel Institute for the World Economy with a growth forecast of 2.6 percent.

The most pessimistic is the IHW in Halle, which only expects growth of 2.1 percent.

For 2022, however, the institutes expect a strong increase of up to 5.1 percent.

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