German business confidence weakened for the third straight month in September as the supply bottlenecks dampened manufacturers' expectations, survey results from the ifo Institute showed on Friday.
The business climate index dropped to 98.8 in September from 99.6 in August. The score was forecast to fall to 98.9.
Companies were less satisfied with their current business. They were also more skeptical about the coming months.
The current situation index declined unexpectedly to 100.4 from 101.4 in the previous month. The expected level was 101.8.
At the same time, the expectations index fell less-than-expected to 97.3 from 97.8 in August. The reading was seen at 96.5.
Problems in the procurement of raw materials and intermediate products are putting the brakes on the German economy, ifo President Clemens Fuest, said. Manufacturing is experiencing a bottleneck recession.
The third successive decline in the ifo business confidence provides further evidence that Germany's recovery is losing steam, as supply chain difficulties persist and the surge in gas prices piles additional pressure on prices and production, Michael Tran, an economist at Capital Economics, said.
That said, the economist still expects strong GDP growth in the third quarter, given the low base at the start of the second quarter.
The survey showed that the business climate fell sharply in the manufacturing sector. Companies were noticeably less satisfied with their current business. Optimism also deteriorated further.
In the service sector, the business climate improved in September due to companies' appreciably more confident expectations. Their assessments of the current situation were slightly worse. The degree of optimism improved in hospitality and tourism, while expectations deteriorated in logistics.
In trade, business sentiment was almost unchanged. While businesses were a little more satisfied with their current situation, their pessimism concerning the coming months grew somewhat.
In construction, the business climate improved markedly. Assessments of the current situation rose to their highest level since March 2020 and expectations brightened considerably in September.