BERLIN (Reuters) – The confidence of the German economy has fallen in June to its lowest level in more than a year, suggesting that sentiment among executives in Europe's largest economy is dimming as the world turns into a full-blown Trade war slips off.
Activity in all four economic sectors The Ifo Institute, which opened Monday in the survey – Manufacturing, Services, Trade and Construction – was down after the economy cooled after a boom last year.
Ifo said its business climate index had fallen to 101.8, the lowest level since May 2017. The value was slightly stronger than predicted in a Reuters consensus forecast of 101.7.
"The tailwind of the German economy is (diminishing)," said Ifo boss Clemens Fuest.
But economists ruled out a recession, predicting that the economy would continue to grow, albeit at a slower rate than last year (2.5 percent).
"The modest decline confirms our … narrative of a slowed economy to normal growth," wrote Uwe Burkert of the LBBW Bank in a note. "However, this is not a downturn and certainly not a recession."
Much of the German data released this year has pointed to a slowdown in the economy.
Industrial activity and exports were weak in the first four months, and US President Donald Trump now threatens to impose high tariffs on car imports from Europe in addition to unilateral tariffs on metals – a trade dominated by Germany.
German business leaders also fear that a parallel trade confrontation between Washington and Beijing could harm exporters who rely on the world's two largest economies.
"The boom is over, the German economy is heading for normalization," said Ifo economist Klaus Wohlrabe to Reuters.
"The debate over a trade war triggered by Trump is weighing on sentiment and uncertainty has risen slightly."
Letter from Joseph Nasr; Arrangement of John Stonestreet