German Business Confidence Dropped to 15-Month Low in September

Monday, 26 Sep 2011 07:06 AM

 

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German business sentiment fell for the third time in a row in September to its lowest level in 15 months, suggesting Europe's powerhouse economy is slowing as the eurozone's debt crisis reaches a critical new stage.

The Munich-based Ifo think tank said on Monday its business climate index, based on a monthly survey of some 7,000 companies, fell to 107.5 in September from 108.7 in August.

That was better than the 106.5 forecast in a Reuters poll of 50 economists and the euro rose briefly after the data. But economists said the slightly better-than-expected headline could not mask the fact that Germany's contribution to the broader eurozone economy was slowly eroding.

"German businesses are adjusting their expectations further downwards but the panic from August seems to be over," said Carsten Brzeski, economist at ING.

A sub-index on current conditions fell to 116.0 from 118.1 in August, while the expectations reading dropped to 98.0, the first time below 100 in two years, down from a revised 100.0 in August.

Ifo economist Klaus Abberger told Reuters German firms were skeptical about the future and expected no further stimulus from abroad, adding however that he did not see a recession yet.

The strength of the German economy has provided a lifeline to peripheral eurozone countries who have been struggling under the weight of their debt burden.

But data increasingly point to a weaker outlook for Germany's economy, dampened by the twin debt problems in the U.S. and Europe and a slowdown in the U.S. economy.

Last week, a separate gauge of investor sentiment fell to its lowest in nearly three years and German business activity came close to stalling in September, underscoring concerns the German economy can continue to buoy the broader eurozone.

A weakening in Germany's economy may make Germans more reluctant to help countries like Greece, which many feel have lived beyond their means.

European policymakers began working on new ways to stop fallout from Greece's near-bankruptcy from inflicting more damage on the world economy after stinging criticism for failing to stem the debt crisis.

© 2014 Thomson/Reuters. All rights reserved.

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