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German economy heads for doldrums as business morale dips again: Ifo

Key Points
  • The Ifo institute said its business climate index fell to 97.4 from 97.9 in May.
  • The June reading compared with a consensus forecast for 97.2.
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Monetary policy won't save Germany's cooling economy: Ifo president

German business morale deteriorated for the third month in a row in June, a survey showed on Monday, adding weight to expectations that Europe's largest economy contracted in the second quarter.

The Ifo institute said its business climate index fell to 97.4 from 97.9 in May. The June reading compared with a consensus forecast for 97.2.

"This year will be weak, and next year we would expect manufacturing to stabilize," Ifo President Clemens Fuest told CNBC's "Street Signs Europe " Monday.

But, he added: "Currently we have no data suggesting that the turnaround in manufacturing is already happening."

A worker at the Siemens gas turbine factory on January 8, 2010 in Berlin, Germany.
Sean Gallup | Getty Images

The services sector has been providing impetus as manufacturing shrinks.

The Bundesbank said this month it expects the economy to contract slightly in the second quarter after an expansion of 0.4% between January and March.

After nine successive years of growth, Germany is struggling as its export-dependent manufacturers battle headwinds from trade disputes, Brexit uncertainties and a cooling world economy.

The economy has been relying on private consumption for growth, a cycle supported by a robust labour market, low interest rates and rising wages.

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