“This further worsening is driven by manufacturers, not suppliers,” ifo expert Oliver Falck said in a statement.
The situation indicator for manufacturers plunged to 15.6 points, down from 36.5 points in November, the institute said.
Manufacturers remain affected by supply bottlenecks for intermediate products. Their international business seems to be faltering, the ifo added, citing a fall in the index for export expectations from 51.1 points in November to 28.1 points in December.
“Manufacturers’ expectations are also no longer so rosy,” Falck said. Their business expectations plummeted from 42.7 points to 18.2 points in December.
Manufacturers’ worsening situation is having a direct impact on suppliers, the statement said. While their situation indicator did rise, from minus 21.7 points in November to minus 13.6 points the following month, it remains deep in negative territory.
“Suppliers’ business expectations are more pessimistic than they have been for almost two years,” the ifo said, adding that this index fell from minus 24.8 points to minus 28.6 points in December.
“Recent announcements by automakers that they are looking to further expand their involvement in China is certainly depressing the mood of medium-sized suppliers in particular, who are heavily dependent on automotive production in Germany,” Falck said.