German August Ifo Business Confidence Falls To 3-Year Low

(RTTNews) - The German business confidence deteriorated more than expected in August, reaching the lowest level in three years, as the economy experiences a more difficult situation. Firms have assessed the current business situation as clearly unfavorable and projected further negative development in the coming half year.

Tuesday, the business survey results released by the Munich-based Ifo research institute revealed that the business confidence index fell to 94.8 in August, declining for three consecutive months. Economists had expected the index to fall to just 97.2 from July’s 97.5.

The Ifo survey is based on 7,000 monthly responses of firms in manufacturing, construction, wholesaling and retailing across Germany.

Manufacturers participated in the survey viewed that the business climate cooled off further, while construction contractors assessed that business confidence worsened somewhat in August. While, business confidence in retail sector dropped slightly, it brightened in wholesaling.

The index that measures current situation fell to 103.2 in August. The indicator stood below July’s revised reading of 105.6 and 104.5 expected by economists.

Manufacturers were less satisfied with their current business situation, while retailers were less dissatisfied with their current situation assessment. At the same time, the current situation was seen as slightly positive in wholesaling.

Further, the expectations index came in at 87 in August compared to 89.9 in July. The index stood below the expected reading of 90.5.

Regarding the six-month outlook, manufacturers were more skeptical about their future as respondents projected a weaker support from export business. Further, they intend to exercise more caution in employing additional staff. Contractors assessed their outlook as more unfavorable and retailers were also doubtful about their future.

Further, the Ifo report showed that the business climate indicator for the service sector declined to 7.7 from July’s 9.9. The service providers were somewhat satisfied with their current situation but were clearly skeptical regarding the six-month outlook.

Commenting on the Ifo survey results, Frï¿½dï¿½rique Cerisier, an economist at BNP Paribas said in a note that recent evolution of business climate and activity are somewhat alarming. The sub indices notably suggest a major correction in firm’s expectations, he added.

According to the Purchasing Managers’ survey, the service sector activity in Germany fell to a 7-month low in August. The Flash Markit services activity index dropped to 50.6 in August from 53.1 in July. Meanwhile, the Purchasing Managers’ Index for manufacturing sector slid to a 36-month low of 49.9 in August.

There are rising fears of a possible recession in the largest Eurozone economy. A detailed report from the statistical office showed on Tuesday that the German economy shrank in the second quarter for the first time in almost four years on reduced investment in construction as well as machinery and equipment. The economy contracted 0.5% sequentially in the second quarter, after expanding 1.3% in the first quarter.

Elsewhere, a monthly survey from the GfK Group showed that German consumer confidence, which was depressed by subdued economic outlook reached the weakest level since 2003. Consumer confidence for September dropped to 1.5 points from August’s 1.9 points.

For comments and feedback: contact editorial@rttnews.com

Posted in Categories: Economy, Eurozone, Forex, Releases, Stocks.