Get breaking news alerts via email

Click here to manage your alerts
German business confidence drops as risks mount
Economy » Slowing growth, escalating conflicts cause index to fall for third month.
First Published Jul 25 2014 02:53 pm • Last Updated Jul 25 2014 03:02 pm

Frankfurt, Germany • German business confidence dropped more than economists predicted to the lowest level since October as weaker growth and escalating tensions in Ukraine weigh on the outlook for Europe’s largest economy.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, fell to 108 from 109.7 in June, marking the third straight monthly decline. Economists predicted a reading of 109.4, according to the median of 35 estimates in a Bloomberg News survey.

Join the Discussion
Post a Comment

Today’s report follows a series of weak economic data for Germany that included industrial production dropping for a third month in May, factory orders falling more than economists expected and retail sales decreasing for a second month. Gross domestic product may have remained unchanged in the second quarter from the previous one, when it rose 0.8 percent, the Bundesbank said this week, and political uncertainty in some of the country’s export markets may damp growth going forward.

"The third decline of the Ifo index in a row is disappointing," said Ralf Umlauf, an economist at Helaba in Frankfurt. "The overall high level of the Ifo indexes still suggests an expansion of the German economy, even though the momentum in the second quarter may have probably almost stalled."

Ifo’s gauge of current conditions fell to 112.9 in July from 114.8, while a measure of expectations declined to 103.4 from 104.8 in June.

Construction declined in the second quarter after activity was bolstered by mild weather at the beginning of the year, while manufacturing suffered from political woes outside the country, according to the Bundesbank.

Yet, gauges of factory and services activity suggest the economic slowdown may prove temporary. A Purchasing Managers Index for services expanded at the fastest pace in three years in July and manufacturing accelerated.

Germany "is growing at a robust 0.7 to 0.8 percent pace at the start of the third quarter," Chris Williamson, chief economist at London-based Markit Economics, said Thursday.

Companies’ performance and their business outlook diverge. Berlin-based Zalando SE, Europe’s largest online-only shoe and fashion retailer, broke into profit in the second quarter and envisions an initial public offering as early as this year, while Software AG, Germany’s second-biggest software maker, lowered its full-year forecast this month.

The Bundesbank predicts the German economy will grow 1.9 percent this year, 2 percent in 2015 and 1.8 percent in 2016. That compares with European Central Bank forecasts for the euro area of 1 percent in 2014, 1.7 percent next year and 1.8 percent in 2016.

story continues below
story continues below

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment

About Reader Comments

Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.