Confidence in German economy sinks
EPA/UWE ZUCCHI
A leading German business questionnaire has revealed that confidence in the economy is the worst it has been in two and a half years.
The IFO Business Climate Survey, conducted by the CESifo Group based in Munich, found that the economic mood had darkened for August in their monthly survey, from the responses of 7,000 companies in the manufacturing, construction, wholesaling and retailing sectors.
The worst affected sectors were in retailing and wholesaling, who received indexed negative scores of 4.7 and 2.1 respectively, both had positive scores in the two previous studies taken in June and July.
For the construction industry a negative score was reached for the fifth consecutive month, but August’s figure of minus 6.9 was only a slight drop from July by 0.2, suggesting that there is still some room for optimism.
Although there was better news from the survey for manufacturing as there was a decline in negative attitudes, as the figures improved by 0.8 from the preceding study in July.
Klaus Wohlrabe, an expert in business cycles and attitudes with the CESifo Group, said: “We will have to wait a few months yet to see if these attitudes are ingrained in the business sectors, this is particularly true of the retailing sector which can be volatile, five months ago the feedback from retail was very positive.”
“There is a lot of psychology involved, and the increase in energy prices and gas prices have taken their toll, this will likely reduce investment and orders in these sectors. The manufacturing sector is more positive, but many manufacturers especially car manufacturers still want to see what the politicians want to do in the current climate with the debts crises still such a pivotal issue.”
German businesses will be looking for clarity beginning with the constitutional court’s decision to be delivered next month on the legality of the European Stability Mechanism.
Confidence will have been knocked further by the reduction in growth for the second quarter of this year, although official figures posted 0.3% growth, this was down by 0.2 % from the first three months of the year.
The CESifo Group say they expect this trend to continue with growth for the next quarter to be reduced further to 0.1 percent as the Eurozone remains in dire straits.
“I think that the corporate sector and German SME’s are still worried about the debt crises and believe it will take more time than thought to resolve.” Matthias Schaefer, head of the department of economic policy at the think tank Konrad Adenauer-Stiftung.
“There are more worried about the competitiveness of several EU member states, and are worried about how the United States and China is doing. There needs to be clear perspectives on the banking union and the role of the ECB, there is anxiety that the banking system is not stable. The corporate sector does not have a reliable partner in the banking sector at the moment.”
A separate IFO survey on the service sector interviewing 2500 companies also showed that confidence was dwindling, but with a positive score of 12.7 it is a far relatively optimistic sector. NEW EUROPE
ABOUT THE AUTHOR
Peter Taberner has previously written for Financial News, Investment and Pensions Europe, Utility Week, EGOV Monitor, European Pensions, Suite101.com, PPP Bulletin, Global Pensions Weekly, Tobacco Journal International, IPS and Seeurope.net.
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