German business sentiment declined for the fifth consecutive month in September suggesting that even the bond purchase programme announced by the European Central Bank failed to shore up confidence.
The business climate index fell to 101.4, which was the lowest since March 2010, from 102.3 in August, the survey based on 7,000 executives by the Ifo Institute showed Monday. The index was forecast to remain unchanged at 102.3.
The index for current situation dropped to 110.3 from 111.1. The companies surveyed are again less satisfied with their current business situation. Economists had forecast a reading of 111.
Suggesting greater pessimism about the future, the gauge of executives' expectations dropped to 93.2 from 94.2 and stayed well below the consensus forecast of 95. The September reading was the lowest since May 2009.
In manufacturing, the business climate continued to cool significantly in September. Although survey participants were more cautious in their assessment of the current situation, it stayed above the long-term average. Expectations, on the other hand, dropped for the fifth month and remained clearly negative.
At the same time, business climate recovered at both retailing and wholesaling levels. Meanwhile, business confidence in construction dropped again in September.
The business climate index in the service sector gained slightly in September following three consecutive decreases. Assessments of the current business situation improved somewhat and expectations remained slightly optimistic.
According to a survey by the Centre for European Economic Research (ZEW), Germany's economic sentiment rose notably in September as investors were calmed by ECB's bond purchase plan.
However, today's Ifo index shows that German companies remain sceptical about the economic impact of ECB Chief Mario Draghi's magic, ING Bank NV economist Carsten Brzeski said. The survey suggests that the largest euro area economy will see a contraction in the third quarter.
The German economy expanded 0.3 percent in the June quarter. Citing weak domestic investment and slowing global growth, Germany's IfW think tank this month downgraded its growth projection for both 2012 and 2013 to 0.8 percent and 1.1 percent respectively.
Jennifer McKeown, a senior European economist at Capital Economics, said while Germany might have avoided a recession in the third quarter, it seems like only a matter of time before the economy starts to contract.
by RTT Staff Writer
For comments and feedback: email@example.com