German firms downbeat on next half year

Julian Harris
Follow Julian
BUSINESS confidence in Germany for the coming six months has sunk to its lowest level since June 2009, a leading survey revealed yesterday.

The Ifo business climate’s expectations sub-index fell for the seventh straight month, measuring 98 points for September -- down from 100 last month.

Yet the headline Ifo index -- which also includes sentiment related to current business conditions -- fell less than expected, down to 107.5, from 108.7 last month.

Many economists had expected the headline measure to sink below the 107 mark.

The sub-index that records the current business situation was barely down in September, suggesting that the expected hit to the Eurozone’s largest economy is yet to come.

The current situation index came in at 117.9, down slightly on August’s score of 118.1.

“The continuing favourable situation of companies shows that the German economy has so far managed to decouple from political turbulence,” the report said.

Yet the survey showed that businesses are preparing for the worst. The German economy could fall into contraction in the fourth quarter of the year, the Organisation for Economic Co-operation and Development (OECD) predicted earlier in the month.

And firms are expecting a hit from economic slowdown throughout the world. “The index measuring export market expectations for the next six months declined again,” said Ken Wattret of BNP Paribas. “High uncertainty and sharp declines in equity prices were cited by Ifo as impacting on companies’ expectations.”

Nonetheless, any such downturn should not turn into a double-dip, according to Wattret, as industrial firms continue to hire. “Companies in Germany still perceive that the decline should be of a temporary nature and not turn into a recession,” he said.