- usiness morale has fallen significantly in industry and retail
- Expectations are getting more pessimistic
- But there are no signs of a recession at the moment
- Threat of gas shortages has increased uncertainty
It will be a bit naive to completely rule out a recession at this stage. The combination of higher and more persistent inflation as well as the gas supply shortage will present major economic headwinds to Germany in the months ahead. If the former doesn’t ease significantly, I doubt things on the ground will see a turn for the better.