'Bleak mood': Germany's business sentiment dwindles in August

Business sentiment declined in Germany this month as a “bleak mood” persists in the country, according to the Munich-based Ifo Institute for Economic Research.

The Business Climate Index slipped to 88.5 in August from 88.7 in July, according to a report released by the institute on Thursday.

“A bleak mood hangs over the German economy,” the report warned, saying firms remain less than satisfied and “the strong pessimism of their outlook for the coming months is virtually unchanged.”

Supply chain bottlenecks, however, eased significantly this month, with 62% of businesses complaining about material shortages and bottlenecks, down from 73.3% in July.

The German economy is likely to shrink around 0.5% in the third quarter, the institute said.

“The index in manufacturing is unchanged. Order backlogs declined again slightly. The chemical industry in particular reported serious problems,” the report said.

“In the service sector, the business climate recovered slightly after its drastic plunge the previous month.”

While sentiment in tourism was on the up, the indicator in trade continued its downward slide, the report said.

“Many enterprises are facing a dilemma: high inflation is dragging down their business, but they can hardly avoid raising prices due to increased costs,” it added.