German business confidence slumps in February

23rd February 2005, Comments 0 comments

23 February 2005, MUNICH - German business confidence unexpectedly slumped in February, a key survey of 7,000 executives released on Wednesday showed, as Europes biggest economy struggles to remain on a growth path. Drawn up by the influential Munich-based Ifo economic institute, the index dipped to 95.5 points from 96.4 points in January with both the report's components measuring future expectations and current conditions falling. The drop in the indexs February reading was worse than what economists had

23 February 2005

MUNICH - German business confidence unexpectedly slumped in February, a key survey of 7,000 executives released on Wednesday showed, as Europes biggest economy struggles to remain on a growth path.

Drawn up by the influential Munich-based Ifo economic institute, the index dipped to 95.5 points from 96.4 points in January with both the report's components measuring future expectations and current conditions falling.

The drop in the indexs February reading was worse than what economists had expected with the consensus forecast for a rise to 96.7 points in the Ifo, which is considered to be one of the 12- member eurozone's most important economic indicators.

The drop in February follows two consecutive monthly rises in the index as a consequence of rising hopes about the outlook for the German economy during the coming 12 months.

But Gernot Nerb, who heads up the Ifo survey told CNBC Europe TV on Wednesday that German business leaders relatively positive outlook for exports had failed to offset the current sluggish state of domestic demand with private consumption hit by high unemployment.

The switch from exports to domestic growth is not functioning," said Nerb.

The continuing hopes for Germanys key export machine come in the wake of the euro falling back from recent highs against the dollar and are despite concerns expressed by the nations business groups that the on-going strength of the common currency will hit foreign orders.

The euro, which climbed to a record high of USD 1.3666 in December, was trading at about USD 1.32 following the release of the closely watched Ifo report.

"In manufacturing and retailing the business climate index declined due to weaker assessments of the current situation," Ifo President Hans-Werner chief said releasing the index with signs that Germany is again emerging as a drag on eurozone growth.

The publication of the results of the latest Ifo survey coincided with the release of a report showing business confidence in Italy, the eurozone's third-biggest economy, dropping to a 14-month low.

The Ifo reports release also follows a series of downward revisions in German growth forecasts for 2005 and is likely to mean that the European Central Bank will be in no rush to follow the worlds other leading central banks and increase interest rates.

Highlighting the German economys weak start to 2005, the countrys federal statistics office said on Tuesday growth shrank 0.2 percent in the last quarter of 2005 after a subdued third quarter.

"With all the will in the world, I can't see a long, sustainable recovery," Sinn told the German business daily Handelsblatt on Wednesday. In the medium term, it will again be bad."

While the Ifo index gauge for current business edged down to 94.5 from 95.3 in January, the component measuring future business conditions fell back to 96.4 in February from 97.5 in January.

DPA

Subject: German news
 

0 Comments To This Article