Further fall in German business confidence


BUSINESS CONFIDENCE in Germany has fallen for the fifth consecutive month, according to a closely watched survey, suggesting that Europe’s largest economy is catching a chill from its crisis-hit neighbours.

The euro dropped in trading after the Ifo index results dashed market expectations that it would stay steady in September. The figures showed a “considerable cooling off” from 102.3 to 101.4 per cent.

The lowest result since February 2010 reflects the views of 7,000 managers quizzed by Munich’s Ifo index about their companies’ current situation and future prospects.

“Once again they are less satisfied with the current business climate and are looking pessimistically to the future,” said Ifo president Prof Hans-Werner Sinn.

He said that the latest results remained above long-term averages but indicated that “braking influences dominate the economy”.

Continuing a trend from last month was the negative situation of Germany’s crucial export sector.

“It looks as if German businesses realise that keeping the euro zone alive will not return growth quickly,” said Carsten Brzeski, economist at ING, in a note to clients.

He suggested the drooping Ifo index suggested a doubt among German companies about the “economic impact of Mario Draghi’s magic”.

Plans by European Central Bank president Mario Draghi to begin unlimited bond-buying, while welcomed by financial markets, have been highly unpopular in Germany.

Last week the ZEW survey showed German analyst and investor morale picked up in September.

Germany’s Bundesbank shrugged off the gloomier view from Munich, saying in its monthly report that the economy is, “for the moment, continuing its cautious upward-oriented course . . . Since July, industrial output has been picking up again, and construction activity has been growing, too,” said the Bundesbank in its monthly report.

But the Bundesbank conceded that “weaker dynamics” and “great uncertainties” lay ahead for Europe’s largest economy.

Analysts said the Ifo figures were a sober reminder that the German economy was not completely insulated from the rest of the euro zone.

“The drop in Ifo business confidence is a potent reminder that the outlook for the German and euro zone economies still hangs in the balance,” said Holger Schmieding, economist at Berenberg investment bank.

“Further policy steps to contain the euro crisis may be needed for the euro zone to turn the corner.”

Yesterday’s Ifo data reflects a noticeable cooling off in Germany’s manufacturing sector, with industrial giants from Siemens to Daimler conceding a deteriorating situation among its foreign business.

Already industrial giants Bosch and ThyssenKrupp have announced plans to fight a dip in orders with a revival of “Kurz-arbeit”, government-subsidised short-time work, to retain skilled workers at lower cost.