The pessimistic outlook for business in Germany

Germany’s business outlook has dropped to its lowest level this year, proof that Europe’s largest economy is struggling to consolidate its recovery after the last recession.

The confidence index of the Munich-based Ifo institute fell to 88.5 in June. The expectation in the market was that the index would rise to 90.7.

The expectations index, which was 88.3 in the previous month, decreased to 83.6 in June. The expectation index was also lower than the expectations of all economists surveyed by Bloomberg.

“Weakness in the manufacturing sector is pushing the German economy into turbulent waters,” said Ifo President Clemens Fuest.

The data underscores that industrial recession across the developed world, due to weakening demand from China, is putting pressure on German manufacturing, the engine of growth in the Eurozone.

Germany’s Ministry of Economy said this month that there has yet to be a “visible recovery” in production after a fall that has plunged the rest of the region into recession.

The Bundesbank predicts a 0.3 percent contraction in the economy for this year.

The purchasing managers survey released on Friday also confirmed this picture, showing that economic activity in Germany lost more momentum in June than expected due to the slowdown in the services sector and continued weakness in the factories.

A separate report published over the weekend presented a more optimistic picture. Despite the recent economic downturn, business confidence is returning to Germany as energy costs fall, according to a survey of 1,000 small and medium-sized businesses by banks.