# Ukraine war, energy crisis send German business sentiment to lowest level since June 2020
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: German Business Morale Falls to Lowest Level Since June
Meta Description: German business morale falls in August to lowest level since June 2020 due to Ukraine war, energy crisis, and fears of economic downturn in third quarter.
URL: https://financedigest.com/ukraine-war-energy-crisis-send-german-business-sentiment-to-lowest-level-since-june-2020html

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By Miranda Murray

BERLIN (Reuters) -German business morale in August fell to its lowest reading since June 2020 amid high uncertainty due to the Ukraine war, the resulting energy crisis and fears of an economic downturn in the third quarter, a survey said on Thursday.

The Ifo institute’s closely watched business climate index fell for a third consecutive month but less than expected to 88.5, from an upwardly revised reading of 88.7 in July. A [Reuters poll](https://www.financedigest.com/bank-of-england-to-raise-rates-by-50bps-again-to-tame-inflation-reuters-poll.html "Bank of England to raise rates by 50bps again to tame inflation: Reuters Poll") of analysts had pointed to an August reading of 86.8.

Analysts called the small month-on-month [change a positive surprise but stuck to their warnings](https://www.financedigest.com/uk-watchdog-warns-crypto-firms-to-prepare-for-advertising-rule-change.html "UK watchdog warns crypto firms to prepare for advertising rule change") about a coming recession.

Things could well have been worse,” said VP [bank chief](https://www.financedigest.com/deutsche-bank-names-eigendorf-new-chief-sustainability-officer.html "Deutsche Bank names Eigendorf new chief sustainability officer") economist Thomas Gitzel. “But there is no reason to breathe a sigh of relief.”

Uncertainty among the companies remains high, and the [German economy as a whole is expected](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report") to shrink in the third quarter,” said Ifo President Clemens Fuest.

Europe’s [largest economy will likely shrink by half a percentage point in the third quarter](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA"), predicted Ifo head of surveys Klaus Wohlrabe.

The [German economy grew 0.1% in the second quarter](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter"), the statistics office said earlier on Thursday, beating expectations of stagnation in line with a flash estimate in July.

The [business climate in manufacturing remained](https://www.financedigest.com/iran-open-for-business-but-caution-remains-the-watchword.html "Iran: ‘open for business’ – but caution remains the watchword") unchanged in August, while service providers viewed the current situation as somewhat better, said the survey of about 9,000 businesses.

In a positive sign, the number of [companies complaining of material](https://www.financedigest.com/uk-to-fine-tech-companies-that-fail-to-remove-self-harm-material.html "UK to fine tech companies that fail to remove self-harm material") and supply bottlenecks was at its lowest in well over a year, at 62%, from 73% the month before, Wohlrabe told Reuters.

Commerzbank chief economist Joerg Kraemer [pointed out that the index was still in recession territory and that the gas crisis](https://www.financedigest.com/explainer-credit-suisse-how-did-it-get-to-crisis-point.html "Explainer-Credit Suisse: How did it get to crisis point?") was taking its toll on companies as well as consumers.

We expect the [second half of the year](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row") and the first quarter of next year to be more recessionary than ever,” he said.

European countries have been racing to fill their gas storage facilities as Russian energy giant Gazprom has reduced supply via the [Nord Stream](https://www.financedigest.com/denmark-invites-nord-stream-operator-to-help-salvage-unidentified-object.html "Denmark invites Nord Stream operator to help salvage unidentified object") 1 pipeline, increasing concerns about a potential gas shortage come wintertime.

(Reporting by Rachel More and Miranda Murray, editing by Kirsti Knolle and Raissa Kasolowsky)


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