Wider worries hit German business confidence
Source: Bloomberg News |
August 25, 2011, Thursday
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Print Edition
Print Edition
GERMAN business confidence fell to the lowest in more than a year as a global slowdown and Europe's debt crisis damped the outlook for economic growth.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 108.7 in August from 112.9 in July. That's the lowest since June 2010. Economists forecast a decline to 111, according to the median prediction of 37 economists in a Bloomberg News survey. The index reached a record high of 115.4 in February.
Germany's benchmark DAX Index has plunged almost 25 percent since late July on fears that another global slump will sap demand for the country's exports, the main driver of its economic expansion. The debt crisis is also curbing demand within the eurozone as governments from Greece to Spain cut spending. German growth slowed to just 0.1 percent in the second quarter from 1.3 percent in the first, the Federal Statistics Office reported on August 16.
"The figures are quite disappointing but they're no reason to panic," said Juergen Michels, chief eurozone economist at Citigroup Inc in London. "The economic recovery in Germany has seen its peak but we won't see growth stagnating or a recession as order books are full and domestic demand will kick in."
Ifo's gauge of the current situation decreased to 118.1 from 121.4, while an index measuring executives' expectations fell to 100.1 from 105.
Investor confidence plunged the most in five years this month, the ZEW Center for European Economic Research in Mannheim said yesterday. It cited fears of a United States recession and Europe's debt crisis.
"We've seen turbulences worldwide in financial markets and indications that the US business cycle is much weaker than previously thought and of course the German economy is not immune" to that, the Ifo Institute's Kai Carstensen said.
Growth in the 17-member eurozone, Germany's main export market, slowed to 0.2 percent in the second quarter from 0.8 percent in the first. UniCredit Global Research yesterday cut its growth forecasts for the region. The economy will expand 1.7 percent this year and 1 percent in 2012, UniCredit's chief eurozone economist Marco Valli said, paring his estimates from 2.1 percent and 1.7 percent respectively.
The Bundesbank said this week it still expects the German economy to expand about 3 percent this year as unemployment at a two-decade low of 7 percent bolsters household spending. Growth in the manufacturing industry unexpectedly held steady this month, a survey of purchasing managers this week showed.
Luxury carmaker Audi AG is hiring staff to increase production, including a 57 percent capacity boost for the 69,600 euro (US$101,400) A8 flagship sedan, on expectations that the luxury-auto industry will weather the stock-market slump.
"The current level of Ifo's headline index is indeed a long way above the levels usually consistent with recessions in Germany," Ken Wattret, chief eurozone market economist at BNP Paribas in London said in an emailed note.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 108.7 in August from 112.9 in July. That's the lowest since June 2010. Economists forecast a decline to 111, according to the median prediction of 37 economists in a Bloomberg News survey. The index reached a record high of 115.4 in February.
Germany's benchmark DAX Index has plunged almost 25 percent since late July on fears that another global slump will sap demand for the country's exports, the main driver of its economic expansion. The debt crisis is also curbing demand within the eurozone as governments from Greece to Spain cut spending. German growth slowed to just 0.1 percent in the second quarter from 1.3 percent in the first, the Federal Statistics Office reported on August 16.
"The figures are quite disappointing but they're no reason to panic," said Juergen Michels, chief eurozone economist at Citigroup Inc in London. "The economic recovery in Germany has seen its peak but we won't see growth stagnating or a recession as order books are full and domestic demand will kick in."
Ifo's gauge of the current situation decreased to 118.1 from 121.4, while an index measuring executives' expectations fell to 100.1 from 105.
Investor confidence plunged the most in five years this month, the ZEW Center for European Economic Research in Mannheim said yesterday. It cited fears of a United States recession and Europe's debt crisis.
"We've seen turbulences worldwide in financial markets and indications that the US business cycle is much weaker than previously thought and of course the German economy is not immune" to that, the Ifo Institute's Kai Carstensen said.
Growth in the 17-member eurozone, Germany's main export market, slowed to 0.2 percent in the second quarter from 0.8 percent in the first. UniCredit Global Research yesterday cut its growth forecasts for the region. The economy will expand 1.7 percent this year and 1 percent in 2012, UniCredit's chief eurozone economist Marco Valli said, paring his estimates from 2.1 percent and 1.7 percent respectively.
The Bundesbank said this week it still expects the German economy to expand about 3 percent this year as unemployment at a two-decade low of 7 percent bolsters household spending. Growth in the manufacturing industry unexpectedly held steady this month, a survey of purchasing managers this week showed.
Luxury carmaker Audi AG is hiring staff to increase production, including a 57 percent capacity boost for the 69,600 euro (US$101,400) A8 flagship sedan, on expectations that the luxury-auto industry will weather the stock-market slump.
"The current level of Ifo's headline index is indeed a long way above the levels usually consistent with recessions in Germany," Ken Wattret, chief eurozone market economist at BNP Paribas in London said in an emailed note.
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