Global recession signals flash again as German business confidence falls to its weakest in 7 years

Reuters

German business confidence declined more than expected in August, falling to its lowest level in close to seven years.
It’s the latest signal that Europe’s largest economy continues is sliding toward a recession.
The drop in sentiment comes less than a week after Germany posted its second-lowest manufacturing readout in six years.
Signs of a recession in Germany having been piling up since early August after the country said its economy shrank in the second quarter.
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German business sentiment sank to its lowest point in close to seven years in August, flashing another signal that Europe’s largest economy is headed for a recession.

The Ifo Institute — a Munich-based economic research institution — said its business climate index fell to 94.3 in August, compared to an expected drop to 95.1, according to Bloomberg. The measure is a widely followed economic indicator in Germany that tracks the outlook for the economic and business environment.

"The situation is becoming increasingly dire," Clemens Fuest, president of the Ifo Institute, told Bloomberg Television in an interview. "The weakness which was focused on manufacturing is now spreading to other sectors."

The disappointing reading comes as a swelling amount of data has begun to indicate Germany’s export-heavy economy is splintering amid slower foreign demand stemming from geopolitical uncertainty and a volatile trade environment.

Last week, Germany’s Purchasing Managers Index — which tracks how private companies view current business conditions — posted its second-lowest reading in six years in July, adding to fears of an economic downturn.

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Concerns of a German recession began to mount in early August after the country said its economy contracted by 0.10% during the second quarter. Germany’s central bank also warned the economy could shrink again in the third quarter. The German government said it was prepared to inject around $55 billion into the economy to shore-up the economy and boost consumer spending.

Germany’s economic woes suggest the Eurozone could be headed for a slowdown as well. The European Central Bank is expected to roll out a significant stimulus package in September that includes a bond-buying program and cuts to its already-negative interest rate.

Going beyond Europe, the US has also flashed recession signals in recent weeks.

A closely watched segment of the so-called yield curve — which tracks the spreads between long- and short-dated Treasury bonds — recently inverted for the first time in 2007. Considering such an inversion has occurred before every single recession since 1950, investors worldwide are on high alert.

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