Business climate index at 85.2 vs 86.7 forecast
Some economists predict second year of recession
Red Sea problems weigh on outlook

BERLIN, Jan 25 Reuters German business morale unexpectedly worsened in January, declining for the second month in a row as Europe39;s largest economy struggles to shake off a recession and shortlived optimism gives way to fears of another weak year.

The Ifo institute said its business climate index fell to 85.2 from a slightly downwardly revised reading of 86.3 in December. Analysts polled by Reuters had expected the indicator to improve in January to 86.7.

The German economy is stuck in recession, said Ifo president Clemens Fuest.

German gross domestic product GDP contracted by 0.3 in 2023.

The tentative revival of optimism last autumn has turned out to be very shortlived, said ING economist Carsten Brzeski, forecasting another shallow recession this year of 0.3.

Last year Germany was plagued by persistently high inflation, high energy prices and weak foreign demand, and topped off with a budget meltdown that prompted deep subsidy cuts while rattling the nation39;s fractious coalition government.

As trade disruptions caused by Houthi attacks on shipping in the Red Sea bring fresh concerns for Germany39;s export industry, the closely watched composite PMI index fell for a seventh consecutive month in January.

However, Ifo39;s head of surveys told Reuters that supply chains remained robust in the face of the Red Sea attacks….