Less confidence
July 22, 2011
German business confidence dipped in July in a sign that Europe's biggest economy could be feeling the impact of the region's debt crisis and a broader global slowdown.
The Ifo research institute in Munich said its business climate index, which is based on a survey of 7,000 executives, fell to 112.9, the lowest in nine months, from 114.5 in June. The index reached a record high of 115.4 in February.
Executives said they anticipated slower growth in exports and were less optimistic about manufacturing, retailing and wholesale businesses. They signaled concern that the austerity measures in numerous eurozone nations and a clouded outlook in the United States with its sluggish growth and high debt could significantly impact sales and profits.
Star performer
The manufacturing climate declined to 23.4 in July from 27.7 in the two previous months, reflecting a drop in the manufacturing purchasing managers' index for Germany in the same period.
Whether German business executives will be more upbeat following Thursday night's new bailout agreement for Greece remains to be seen.
Germany has been the star performer in the industrialized world since the end of the financial crisis.
Unemployment in the country has fallen to its lowest level in two decades, and the German central bank, the Bundesbank, forecasts that the German economy will expand 3.1 percent this year and 1.8 percent in 2012. That compares with growth of 1.6 percent and 1.8 percent respectively in the eurozone, according to European Commission forecasts.
Also on a positive note, Ifo said capacity utilization in manufacturing had risen since spring and companies still planned to hire more staff. The business climate also improved in the construction sector.
Author: John Blau
Editor: Cyrus Farivar