BERLIN (Reuters) – German business morale fell for the third month running in September, hit by supply chain problems that are causing a “bottleneck recession” for manufacturers in Europe’s largest economy, a survey showed on Friday.

According to the Ifo institute, its business climate index dropped from an August reading of 99.6 which was revised upwardly. According to Reuters, September’s reading was 98.9.

Clemens Fuchs, president of Ifo, stated that problems in procuring raw materials are slowing down the German economy.

The manufacturing sector is currently in recession.

Germany is facing uncertainty about its economic outlook. On Sunday the country votes for a national election. After which, Chancellor Angela Merkel will resign. There are many possible coalition outcomes, with the vote split. (https://reut.rs/2ZeqYw3)

On Wednesday, Ifo said it had cut its growth forecast (https://reut.rs/3nU3Ux5) for the German economy for this year as supply chain disruptions and a scarcity of chips and other intermediate goods were slowing down the recovery from the COVID-19 pandemic.

Now, the institute sees Germany’s gross national product (GDP), growing at 2.5% this year, which is 0.8 percentage point less than its previous forecast. It expects 5.1% growth next year. This was an increase of 0.8 points.

After a decline of 4.6% in total economic output for 2020 due to restrictions placed by the coronavirus on business and public life, this is a weaker rebound than was expected.

A separate survey published on Thursday showed Germany’s economic recovery from the pandemic lost momentum (https://reut.rs/3hXp2yy) in September as activity in both the manufacturing and services sectors slowed amid supply bottlenecks and waning catch-up effects.

Although the government had been forecasting growth rates of 3.5% and 3.6% this year, it will be updating its figures in October.

The VDMA Engineering Industry Association published a survey last week that showed many German mechanical engineering companies were experiencing serious or noticeable supply chain issues. This will impact production growth next year.