Alexa

German business confidence hits 5-year low

German business confidence hits 5-year low

Business confidence in Germany has slid to a five-year low on fears of a global recession.
The Ifo institute said Monday that its monthly business climate index fell to 90.2 points in October from 92.9 in September. The fall _ the fifth in a row _ put the closely watched indicator for Europe's biggest economy at its lowest level since April 2003 when it stood at 90.4.
The Munich-based institute said that most German businesses expect conditions to deteriorate within the next six months. A subindex measuring companies' outlook declined to 81.4 from 86.5 _ dropping well below its previous post-unification low of 83.5, reported in November 1992.
Manufacturers "anticipate a clear worsening of their business over the coming six months" and exports are expected to weaken, Ifo president Hans-Werner Sinn said in a statement.
Confidence in the retailing and wholesaling sectors also worsened, and the construction industry was more concerned about the next six months, Ifo said. Consumer confidence in Germany also has been falling.
A second subindex, measuring companies' view of their current situation, was barely changed _ edging up to 99.9 points in October from 99.8 in September.
"The deluge of bad news from global financial markets has led to a sharp drop in demand also in the real sector," said Global Insight economist Timo Klein in Frankfurt. "Recession fears are not being offset to any significant extent by the massive downward corrections of oil prices and the euro."
Alexander Koch, an economist with UniCredit in Munich, said the "strong downward trend" in business sentiment is continuing _ "although the structural advantages of the German economy have not vanished lately and the depreciating euro as well as the heavy correction in commodity prices (brought) relief for the corporate sector."
The 15-nation euro peaked at more than $1.60 in July but has since declined sharply. It was trading just below $1.24 on Monday.
The latest survey from Ifo reinforced gloom over growth prospects for Germany in the immediate future.
In mid-October, the government slashed a full percentage point off its 2009 growth forecast, which it reduced to 0.2 percent from 1.2 percent, citing uncertainty on global financial markets. It left this year's forecast unchanged at 1.7 percent.
The German economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined. The 0.5 percent contraction followed healthy growth of 1.3 percent in the first quarter.
Still, the head of the GfK research group, which produces a monthly consumer confidence index, was quoted as saying by the daily Die Welt that "there is no reason to fall into panic or pessimism."
"If the situation does not escalate further, I see a chance of a growth in consumption" in 2009, Klaus Wuebbenhorst said, according to the report.


Updated : 2021-02-26 10:09 GMT+08:00