(Aug 26): Germany’s business outlook held at its lowest level since February — highlighting the gloom once again engulfing Europe’s biggest economy after an early-year rebound fizzled out.

The Ifo Institute’s expectations gauge dipped to 86.8 in August from a revised 87 the previous month, beating the 85.8 seen by analysts in a Bloomberg poll. A barometer of current conditions also declined. 

“The German economy is increasingly falling into crisis,” Ifo president Clemens Fuest said on Monday in a statement. He noted that expectations worsened in both manufacturing and services.

Optimism that Germany would rebound in 2024 from two years of almost zero growth has faded as an anticipated jump in consumer spending failed to materialise and the country’s industrial sector continues to struggle.

Gross domestic product unexpectedly declined by 0.1% in the second quarter, while S&P’s Global Purchasing Managers’ Index remained below the 50 level that separates expansion from contraction for a second month in August.

The sombre mood was reflected in this month’s investor confidence index by the ZEW institute, which slipped to its lowest level since January. The Bundesbank has warned of continued weakness in manufacturing as “industrial enterprises are navigating a difficult competitive environment.”

Some assistance may be on the way in the form of further interest-rate cuts by the European Central Bank. It first lowered borrowing costs in June and has signaled another move is likely in September.

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