Confidence dip hits Germany’s recovery hopes

Chris Papadopoullos
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BUSINESS sentiment in Germany continued its steep decline this month, dampening hopes that its economy will see an end-of-year recovery.

The business climate index compiled by the Ifo Institute for Economic Research, a Munich-based research institution, fell to 103.2 in October from 104.7 in February, data released yesterday showed.

The index reached a recent peak in April at 111.2 but has continually declined since and now sits at its lowest level since December 2012.

Sharp and persistent declines in the Ifo business climate index have a strong correlation with falling GDP growth.

Last week saw a healthy rise in Germany’s purchasing managers’ index (PMI), a survey published by Markit which is widely used as an indicator for economic growth. But any hope that the positive PMI figures would see the beginning of new recovery now seems to have been muted.

“A sharp drop in the manufacturing index is consistent with weakness in exports and the fall in the retail index suggests that German consumers are not picking up the slack,” said economist Jennifer McKeown from Capital Economics.

Pressure is building on German policy makers. Chancellor Angela Merkel has ruled out large state spending efforts, insisting the country will try to run a balanced budget. German officials have also made no secret of their negative sentiment toward the European Central Bank’s new bond buying programme.

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