Germany's business sentiment deteriorated for the fourth consecutive month in August as firms expressed greater pessimism about their future activity amid fears of recession in the 17-nation currency bloc, a closely watched survey revealed Monday.
The business climate index dropped more than expected to 102.3 in August, the lowest since March 2010, from a revised value of 103.2 in the previous month, the survey based on 7,000 executives by the Ifo Institute showed. The reading was forecast to ease to 102.8.
Business climate weakened for industry, trade and services. According to Ifo, the current business situation as well as expectations among firms deteriorated in August.
Assessment of current conditions fell to 111.2 from 111.5. But the reading stayed above the consensus forecast of 110.9. Likewise, the expectations index eased to 94.2 from 95.5 last month. The expected reading for August was 95.3.
The latest batch of sentiment indicators even points to a contraction in the third quarter, said Carsten Brzeski at ING Bank NV. However, given the sound fundamentals of the economy, any contraction should hardly feel recessionary in Germany.
The largest Eurozone economy expanded for the second straight time in the second quarter on robust growth in exports and domestic spending. Gross domestic product rose 0.3 percent sequentially.
In manufacturing, business climate brightened after three successive declines due to a recovery in current business conditions, Ifo said. Nonetheless, business expectations continued to deteriorate.
The business climate cooled down in retailing and wholesaling. Retailers assessed both the current business situation and their future business outlook as far more unfavorable. The wholesalers surveyed also reported a similar picture.
The business climate indicator in construction dropped slightly in August. The construction firms logged a small improvement in their current business situation, while their six-month business outlook continued to deteriorate.
Business climate in the service sector dropped for the third month in a row in August. Service providers assessed both their current business situation and their six-month business outlook with growing caution.
by RTT Staff Writer
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