section_path: Crisis/Business
section_name: Business
paragraph_text: Business
  
  Due to accumulating additional energy costs of €3.2 billion in 2022 due to German sanctions on Russian gas, the German chemicals company BASF, one of Germany's largest companies and the world's largest chemical conglomerate, cut 2,600 jobs. The company also was forced to shut down plastic chemical plants and two ammonia plants, while moving other operations outside of Germany, citing prohibitively bureaucratic permitting processes, overregulation, and higher production costs.
  
  In April 2024, the ifo Institute, a prominent economic research center in Munich, reported that over half (55.2%) of the companies in Germany's residential construction sector cited a lack of orders. Additionally, 17.6% of German construction companies reported project cancellations, a slight improvement from 19.6% in March. In 2023, construction sector insolvencies increased by over 20%.
  
  In September, the ifo Institute reported a decline in its business climate index for four consecutive months leading up to September 2024. In August 2024, the index fell to 86.6 points from 87 in July, reaching a five-month low. The index, based on surveys of 9,000 German businesses across various sectors, indicated growing dissatisfaction with the current business conditions and pessimism towards future prospects. The consistent decline in business sentiment was seen as an indicator of ongoing economic pressure, which was particularly pronounced in the manufacturing sector, where its sentiment declined to its lowest level since early 2020. The services sector also experienced a sharp downturn that brought to its lowest point since February 2024. Clemens Fuest, President of the Ifo Institute, characterized the situation by stating, "The German economy is increasingly falling into crisis."
  
  Ifo economist Klaus Wohlrabe characterized the German economy as having "settled into stagnation." Factors he cited include a lack of orders across all sectors, weak investment, and consumer reluctance to spend due to inflation uncertainty, leading him to predict a potential further decline in German gross domestic product (GDP) for the third quarter of 2024, following an unexpected 0.2% contraction in the second quarter. Landesbank Baden-Württemberg bank economist Elmar Voelker and VP Bank economist Thomas Gitzel both expressed pessimism significant improvement before the end of 2024, the latter stating that the German economy was on the cusp of either recession or a period of minimal growth.
  
  The Weil European Distress Index, a comprehensive survey of 3,750 European listed companies across various industries and economic indicators, reported in April 2024 that Germany had become "the most distressed market in Europe". This distress was particularly evident in the industrial sector, which struggled with high interest rates, skilled labor shortages, and convoluted anti-business regulations. The German economy's heavy reliance on exports and its rigid labor market further compounded these issues, leading to concerns about increased insolvencies. It noted that increasing rates of inflation and higher borrowing costs forced many businesses to cease or delay projects, impacting capital investments and hiring decisions. Consumers were impacted by rising prices across various necessities and services, in addition to higher mortgage costs that further reduced disposable income.
  
  The German Purchasing Managers' Index (PMI) provided further evidence of economic challenges. The manufacturing PMI fell to 42.1, which marked its "26th consecutive month of contraction" and falling below market expectations. Hamburg Commercial Bank 's Chief Economist Dr. Cyrus de la Rubia noted, "The recession in Germany's manufacturing sector deepened in August, with no recovery in sight." Meanwhile, growth in the services sector continued to decelerate.