German business confidence plummets, fearing an economic recession could usher in a harsh winter.

According to survey data, German business confidence slid down in a stepwise manner in August, deteriorating for the fourth consecutive month.

Data released by the Ifo Institute showed that its business climate index stood at 85.7, down from 87.4 in July. Analysts had predicted an index of 86.7 in a Reuters survey.

The assessment of the current situation dropped to its lowest level since August 2020, with businesses increasingly pessimistic about the outlook for the next six months. Clemens Fuest, president of the Ifo Institute, noted that the German economy has not yet emerged from its difficulties.

Klaus Wohlrabe, the survey head at the Ifo Institute, explained that the main reason for this pessimism is the lack of new order growth, along with a further decline in export expectations. The survey results showed that confidence among German managers across various sectors was broadly hit. Claus Niegsch, an analyst at DZ Bank, believes the signs of economic recovery are not encouraging.

According to data from the Statistical Office, the German economy stagnated in the second quarter compared to the previous three months, marking another sign of downturn after the winter recession.

Niegsch pointed out that high interest rates, persistently high prices, and insufficient foreign trade stimuli will continue to add to the economic burden in the second half of the year. This means the economy might enter another recession period in the last two quarters of the year, with recovery not expected until the start of next year.