Germany's ifo business climate survey data that saw trading sentiment shrink more than expected in July confirmed a recession in Europe's largest economy.
Examining the reading of the survey data, the German business climate index is seen to have dropped to 88.6 compared to the expected 90.2, lower than the reading in June which recorded 92.2.
The lowest drop in 2 years can be attributed to the European conflict with Russia which has caused a spike in energy prices and gas shortages.
It indirectly confirms that a recession is about to hit Germany and that is supported by Klaus Wohlrabe, the head of the ifo data survey.
Commenting further on the current situation, Wohlrabe did not rule out the possibility that Germany would be able to avoid recession if the energy and gas issues could be resolved.
This point is supported by Jorge Kraemer, Commerzbank's economic analyst, who states that the ifo index, which acts in the same way as the purchasing management index (PMI), shows that the German economy is clearly in 'collapse'.
As you know, Germany is facing a gas supply shortage when Russia shut down the Nord Stream 1 pipeline before allowing it to operate again but at 40% capacity.
Russia's decision, under the leadership of Vladimir Putin, to close the Nord Stream 1 pipeline was a response to sanctions imposed by Western powers on its actions to invade Ukraine.
According to Germany's gas network regulator, 40% capacity is insufficient and it will trigger energy rationing in the winter if the government fails to take 'additional steps' to reach 90% capacity.
In the meantime, Kraemer stressed that the German economy is now in Putin's hands.
