Recession clouds gather in Germany, Europe’s largest economy

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FRANKFURT, Germany (AP) — Europe’s largest economy is sending signals of recession.

Germany’s leading future indicator, the IFO business confidence survey, has indicated a decline for the fourth consecutive month as high inflation fueled by skyrocketing natural gas prices undermines consumers’ pricing power and imposes heavy costs to business.

The index compiled by the Munich-based Ifo institute fell to 84.3 in September from 88.5 in August, its lowest level since the global financial crisis more than a decade ago.

“High energy and commodity prices are weighing on demand and putting pressure on profit margins,” said Carsten Brzeski, chief eurozone economist at ING Bank. “Businesses can no longer pass on rising costs to consumers as easily as they did in the first few months of the year.”

Business order books are shrinking, while energy-intensive businesses like bakeries face costs that have them wondering if they can stay in business.

The news comes as more and more economists are predicting a recession for Europe as a whole. Germany was heavily dependent on cheap natural gas from Russia, which cut its supplies to a small fraction of what they were before the February 24 invasion of Ukraine. The gas is used to heat homes, run factories and generate electricity.

European officials say the budget cuts are an attempt to pressure governments not to support Ukraine and for economic sanctions against Russia.

Officials have planned new supplies of more expensive liquefied gas that can come by ship from countries like the United States rather than by pipeline from Russia. But experts say Europe will still have to make a serious push ahead of the winter heating season to save gas.

German Chancellor Olaf Scholz was in Saudi Arabia, the United Arab Emirates and Qatar over the weekend and signed energy deals.

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