Fear of a gas shortage causes German businesses to hope

• Confidence in Germany’s Ifo index decreased by 0.7 points to 92,3 this month.
• Russia’s decision to cut off gas supplies to Europe’s largest economy affects business confidence.
• The German chemical industry is “very concerned” about the possibility of gas shortages.

This month, German business confidence declined as concerns over the highest inflation rate in 40 years and the risk for natural gas shortages increased following Russia’s decision to shut off supplies to Europe’s largest economy.

This month, the Ifo Institute’s index of business confidence decreased by 0.7 points to 92,3 as companies grew more worried about the outlook for the next six months and the status of the German economy.

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The results were worse than anticipated by experts surveyed by Reuters, who predicted the Ifo index would fall to 92.9 on average.

“Rising energy prices and the threat of gas shortages are of great concern to German business,” said Clemens Fuest, president of Ifo.

The manufacturing and retail sectors experienced a decline in confidence, but the services and construction sectors experienced an increase. Fuest stated that the German chemical industry is “very concerned” about the possibility of gas shortages.

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“Energy rationing, either forced or voluntarily due to soaring wholesale prices, is now a real risk,” said Claus Vistesen, an economist at Pantheon Macroeconomics. “Indeed it is now our base case as Russia doubles down on its threat to stop the flow of gas.”