Months-long slide in German business morale deepens

The ‘Europacity’ construction site is pictured in Berlin, Germany, July 27, 2018. — Reuters pic
The ‘Europacity’ construction site is pictured in Berlin, Germany, July 27, 2018. — Reuters pic

FRANKFURT AM MAIN, Feb 22 — Confidence among business leaders in Germany fell for the sixth month in a row in February, a closely-watched survey showed today, as global trade struggles cast a pall over Europe’s powerhouse economy.

The Munich-based Ifo institute’s business confidence index slid 0.8 points this month to reach 98.5, its lowest level in four years.

“The German economy is experiencing a downturn,” Ifo president Clemens Fuest said in a statement.

A sub-index measuring companies’ view of the present business situation dipped 1.1 points, to 103.4, while another gauging expectations for the coming months lost 0.5 points, to 93.8.

Looking to different areas of the economy, manufacturing firms had “far more pessimistic” expectations compared with January.

Services, trade and construction indexes also fell — with the building sector losing ground “for the first time in years,” Fuest noted.

Today’s Ifo release comes one day after an account of the European Central Bank’s January meeting highlighted fierce headwinds in international trade weighing on the 19-nation eurozone.

With its export-oriented manufacturers and massive trade surplus, Germany is one of the countries most exposed to the uncertainty caused by rising protectionism and trade conflicts.

“The threat from the USA of punitive tariffs on our most important export good — cars — is hovering closer than ever,” noted Joerg Zeuner, chief economist at public investment bank KfW.

US President Donald Trump on Monday received a Department of Commerce report that sources said classed European car imports as a national security threat — potentially justifying swingeing new tariffs.

Meanwhile “our important partner Great Britain continues to race towards the Brexit cliff... and the global economy is no longer running smoothly,” Zeuner added.

Such fears have prompted downgrades to the growth outlook by private- and public-sector observers, with Germany’s economy ministry now forecasting just 1.0 per cent expansion in 2019, compared with a 1.8 per cent prediction last autumn. — AFP

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