German business confidenceset to decline in August
25 August 2004 , BERLIN - Soaring oil prices are likely to take their toll on German business confidence with a key economic sentiment survey to be released Thursday expected to show a fall as concerns set in that high energy costs will slow the pace of recovery in Europe's biggest economy. Conducted by the Munich-based Ifo institute, the August survey of the mood among German industry leaders is expected to report a slump for the third month in a row to 95.1 points from 95.6 in July. Based on a survey of
25 August 2004
BERLIN - Soaring oil prices are likely to take their toll on German business confidence with a key economic sentiment survey to be released Thursday expected to show a fall as concerns set in that high energy costs will slow the pace of recovery in Europe's biggest economy.
Conducted by the Munich-based Ifo institute, the August survey of the mood among German industry leaders is expected to report a slump for the third month in a row to 95.1 points from 95.6 in July.
Based on a survey of 7,000 executives, the Ifo report is considered to be one of Europe's most important economic indicators with the release of the report coming in the wake of deepening concern about the fitful performance of global stock markets as well as worries about the economic fallout from this year's more than 40 percent leap in oil prices.
"For the upcoming August survey, we believe that firms are likely to sense increasing headwinds," the investment house Dresdner Kleinwort Wasserstein said in a note to clients.
Already business confidence in Belgium has fallen with a report prepared by the nation's central bank and released Tuesday showing the country's leading indicators dropping by a bigger-than-forecast amount to minus 1.9 in August from 2.3 in July.
Economists also see the Belgian leading indicators as a major gauge of the economic climate in the 12-member eurozone because the country has strong trading links with the currency bloc's other member states.
The Ifo's widely expected fall in August follows the release this month of a key German investor confidence survey which dropped in August after chalking up two consecutive monthly rises.
Evidence of the economic impact of high energy costs has started to emerge with inflation in Germany rising to a higher-than-forecast two percent in August, the Federal Statistics Office said Tuesday. It was the fifth monthly increase in German inflation, which stood at 1.8 percent in July.
Moreover, signs that economic growth may have already started to plateau out in the world's three biggest economies - the US, the eurozone and Japan - has triggered talk that the global economy has hit a soft spot.
While insisting the eurozone's economic upturn was continuing, the European Central Bank issued a warning in its latest monthly bulletin that high oil prices pose risks to the currency bloc's recovery.
"Concerns relate, in particular, to the continued high level of oil prices, which may be sustained by the strength of global economic growth," the report said.
Analysts' renewed worries about the world economic outlook also follow concerns that the eurozone's export machine could be hit by stalling global growth before consumer spending in the currency bloc has managed to fully recover and to offset any slide in the international economy.
Car use in Germany has declined on the back of the recent big jump in petrol pump prices and economists are concerned that high energy costs will not help encourage the country's consumers, already unnerved by high unemployment, to start shopping again.
Underscoring the leading role played by exports in hauling Germany onto a growth path, data released Tuesday showed the nation's exports having grown at more than three percent during the second quarter of the year with consumer consumption edging up by a meagre 0.1 percent. Overall the German economy chalked up a 0.5 percent growth rate in the second quarter.
The downbeat mood among German consumers is expected to be confirmed by a report to be released Friday which is tipped to show consumer confidence slipping as economic worries set in.
Subject: German news