German Businesses Start to Lose Faith

The IFO Business Climate Index tracks the sentiment of German business management. It took a tumble in April, perhaps a reflection of a global economic slowdown, particularly in Europe. Germany is the largest economy in the European Union.

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According to the research firm, the index:

… fell from 99.7 points (seasonally adjusted) in March to 99.2 points in April. Companies are less satisfied with their current business situation. March’s gentle optimism regarding the coming months has evaporated. The German economy continues to lose steam.

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In a statement, Ifo added:

In manufacturing, the business climate has again worsened markedly. Once more, companies rated their current situation less favorably. Pessimism has also grown regarding the coming months. Capacity utilization fell by 0.8 percentage points to 85.4 percent. This is still higher than the long-run average of 83.7 percent.

In the services, the index has risen slightly due to more optimistic expectations. However, service providers rated their current situation somewhat less favorably, although still at a high level.

In trade, the business climate has weakened somewhat. Companies still saw their current situation as very positive, but made downward corrections both to this assessment and to their business expectations. This development was driven by retail trade. Among wholesalers, the index in fact rose slightly.

In construction, the business climate index rose once again. Companies were considerably more satisfied with what was already a very good business situation. However, doubts are growing that the construction boom will continue.

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