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Business confidence in Germany worsened sharply in July as firms turned more pessimistic due to rising energy costs and the threat of gas shortages.
The Ifo business-climate index declined to 88.6 points in July from a revised figure of 92.2 points in June, data from the Ifo Institute showed Monday. This is the lowest value since June 2020. Economists polled by The Wall Street Journal expected the index to come in at 90.5.
“Sentiment in German business has cooled significantly,” Ifo President Clemens Fuest said. German companies are expecting business to become much more difficult in the coming months and they are also less satisfied with their current situation, he said.
The index of the current situation fell to 97.7 in July from 99.4 the prior month, while the gauge assessing companies’ expectations fell to 80.3 from 85.5.
“Germany is on the cusp of a recession,” Mr. Fuest said.
The Ifo index is based on a poll of about 9,000 companies in manufacturing, services, trade and construction.
Write to Maria Martinez at maria.martinez@wsj.com
