Aug MNI analysts survey Jul Jun
median range
———————————————————————–
Business sentiment: 108.7 110.9 109.5 – 111.5 112.9 114.5
Current conditions 118.1 119.6 118.9 – 120.0 121.4 123.3
Six-month outlook: 100.1 102.5 100.0 – 104.0 105.0 106.2
—

FRANKFURT (MNI) – Germany’s business climate continued to
deteriorate more than expected in August, the Ifo institute said on
Wednesday.

After a 1.5-point downturn in July, Ifo’s overall sentiment index
dropped another 4.2 points to 108.7.

“The German economy is not immune to current worldwide
turbulences,” Ifo said in a statement.

Both components fared worst than most analysts had predicted.
Current conditions fell 3.3 points to 118.1, while expectations were
down 4.9 points at 100.1.

“The companies have scaled back their expectations of business
developments in the coming half year,” Ifo said. “The current business
situation, however, continues to be assessed overall as good, although
the situation appraisals in recent months were significantly more
favourable.”

The further deterioration in expectations adds to the mounting
evidence that the economy is losing steam and that fears are growing
that the ongoing debt crisis could spill over into the real economy.

Germany’s manufacturing PMI surprised on the upside in August by
steadying at 52.0 against forecasts of a further drop. Still, it showed
activity expanded at the slowest pace since the start of the recovery in
2009. The services PMI fell from 52.9 to 50.4, barely signaling
expansion.

The ZEW’s investor climate indicator fell for the sixth consecutive
month in August to the lowest level since December 2008. The headline
index, which measures financial market investors’ expectations for the
Germany in the next six months, fell from -15.1 to -37.6 significantly
undershooting the median forecast of -25.0.

Further deterioration of the leading indicator follow a dramatic
slowdown in GDP growth in the second quarter from +1.3% in the first.

However, the Bundesbank said earlier this week that given the
volatile pattern in the first half, “the weak growth in the second
quarter is…not in itself proof that the German economy’s dynamics have
become less stable.”

The central bank said that growth was set to slow in the second
half but confirmed its full-year growth projections of 3.0%.

“Whereas the external setting has become less favourable, the
domestic economy is still very robust, largely as a result of
enterprises’ marked willingness to invest, sharply higher demand in
housing construction in recent months and the favourable labour market
outlook,” the report said.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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