• 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.

• Bridgewater earlier this month disclosed a range of short bets in excess of €1.5bn … it now holds close to €9bn in short positions including Bayer, Allianz, Santander and BASF.

• “Given the deterioration in fundamentals and high inflation I am not surprised that they feel that this may be the beginning rather than the end of the correction,” said Patrick Ghali, co-founder of London hedge-fund advisory firm Sussex Partners.

More at that link to DJ/MW above.

This via AP overnight on news that on Thursday the German government has activated the second phase of its three-stage emergency plan for natural gas supplies

• warning that Europe’s biggest economy faces a “crisis” and storage targets for the winter are at risk

Follows Russia reducing energy deliveries to several countries

• last week reduced natural gas to Germany, Italy, Austria, the Czech Republic and Slovakia

Industrial customers are being asked to reduce the amount of natural gas they use

• “Even if we can’t feel it yet — we are in a gas crisis,” German Economy and Energy Minister Robert Habeck said.

This does not auger well for German industrial production.

Gas prices have come off the boil: