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German Business Confidence Weakens For Sixth Month

ifo nov26 22feb19 lt

Germany's business confidence fell for a sixth straight month in February to its lowest level in over four years, as firms continue to worry that the economic outlook is set to turn bleak due to worsening global trade tensions and political crises such as Brexit.

The business confidence index dropped to 98.5 from an upwardly revised 99.3 in January, results of a survey by the Munich-based Ifo Institute showed on Friday. Economists had forecast a score of 98.9.

The latest reading was the lowest since December 2014, when the score was 98.2.

Signaling the rising concerns among corporate executives, the expectations measure of the survey hit the lowest level since November 2012.

The expectations index dropped to 93.8 from an upwardly revised 94.3. Economists had expected a score of 94.2.

The current assessment index fell to 103.4 from an upwardly revised 104.5 in January. Economists were looking for a 103.9 reading.

"Today's Ifo index somewhat undermines the tentative signs of stabilisation we saw earlier this week in the ZEW index and PMIs," ING economist Carsten Brzeski said.

"The still-high uncertainties, mainly stemming from trade, China and Brexit are denting German business sentiment."

Morale weakened sharply in manufacturing, services and construction, but improved slightly in the distributive trade that includes the retail industry.

"The economic situation in Germany remains weak," Ifo Institute President Clemens Fuest said.

The Ifo Institute said that the latest survey results as well as other indicators point to economic growth of 0.2 percent in the first quarter.

Germany's economy stagnated in the final three months of 2018, thus narrowly avoiding a technical recession, latest data from the Federal Statistical Office confirmed on Friday.

Gross domestic product was unchanged from the third quarter, when the economy shrunk 0.2 percent. Two consecutive quarters of contraction would have meant the biggest euro area economy entered recession.

Positive contributions to growth came from domestic demand with a 0.9 percent increase in gross fixed capital formation. Investment grew 1.3 percent in construction and 0.7 percent in machinery and equipment.

Household consumption edged up 0.2 percent after a 0.3 percent decline in the previous quarter. General government expenditure surged 1.6 percent following a 0.3 percent fall.

Foreign trade failed to make a positive contribution to growth in the fourth quarter as both exports and imports increased by 0.7 percent each on the previous quarter.

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