German business confidence hits 22-month low

GMT 20:19 2014 Monday ,27 October

Arab Today, arab today German business confidence hits 22-month low

A worker is lifted by a crane at a construction site in Berlin,
Frankfurt -AFP

 German business confidence fell for the sixth month to a near two-year low in October, in another gloomy sign for the eurozone despite a reassuring health check on banks, data showed on Monday.
The Ifo economic institute's closely-watched business climate index declined to 103.2 points in October, its lowest level since December 2012, the think-tank said in a statement.
For its survey, Ifo quizzes companies in the biggest eurozone economy about their current business and the outlook for the next six months.
And they were distinctly less positive about both, the survey found.
"Assessments of the current business situation were once again less favourable than last month," said Ifo president Hans-Werner Sinn.
"Expectations with regard to the six-month business outlook also continued to cloud over. The outlook for the German economy deteriorated once again," Sinn said.
In concrete terms, the sub-index measuring current business hit its lowest level since April and the outlook sub-index fell to the lowest level since December 2012.
Analysts had been hoping that recent data could be showing signs of stabilisation as fears recede about the economic fallout from the Ukraine crisis.
Consumer sentiment in Germany is moving back up again and the German purchasing managers' index also increased, driven mostly by falling energy prices and a softening euro.
So the renewed decline in the Ifo survey came as a blow, said Capital Economics economist Jennifer McKeown.
It "suggests that the recovery is unlikely to regain moment at the end of the year," she said.
"We continue to expect German GDP to rise by 1.3 percent this year and 1.5 percent next. But even this will not be enough to ensure a strong recovery or eradicate the threat of deflation in the eurozone as a whole and the risks are to the downside," McKeown said.- 'Dangerous stage' -
ING DiBa economist Carsten Brzeski felt the Ifo drop suggests that "the eurozone's biggest economy has reached a dangerous stage between soft spell and longer-lasting almost-stagnation."
On Sunday, the European Central Bank gave the large majority if eurozone banks a clean bill of health in a crunch new audit aimed at eliminating one of the key factors of uncertainty hanging over the single currency area.
But whether the results of the ECB's "comprehensive assessment" will be enough to turn sentiment around was open to question, said Berenberg Bank economist Christian Schulz.
"We expect a stabilisation before the end of the year. Unfortunately, the October Ifo data suggest that the risks to our near-term calls remains to the downside," he said.
Commerzbank economist Joerg Kraemer said that "after gross domestic product (GDP) stagnated at best in the third quarter, no substantial growth can be expected in the fourth quarter."
- No recession -
"But even we as economic pessimists are not expecting a recession," he added.
UniCredit economist Andreas Rees said the latest numbers "are consistent with a slowdown and not a recession."
"We do not belong to the recession camp for fundamental reasons, since powerful macro airbags have popped up: a weaker euro exchange rate, a lower oil price and a resilient US economy," Rees said.
UniCredit is sticking to its forecast of 1.6 percent for next year, "although the downside risks have increased recently," the expert said.

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