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German Business Sentiment Weakest In More Than 4 Years

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Germany's business sentiment weakened to the lowest level in more than four years in June as companies turned increasingly pessimistic about months ahead amid trade wars.

The business confidence index dropped more-than-expected to 97.4 in June from 97.9 in May. The score was forecast to fall to 97.5, survey data from the ifo Institute showed Monday.

This was the lowest since November 2014, when the reading was 96.1. Companies' assessment of the current situation improved marginally, while their expectations deteriorated further.

The current conditions index rose slightly to 100.8, in line with expectations, from 100.7 in May.

Meanwhile, the expectations index fell to 94.2 from 95.2 a month ago. Economists had forecast the score to ease moderately to 95.1.

The disappointing Ifo business climate is in line with news from China, where despite the economic stimulus package there is still no sign of a turnaround for the better, Jörg Krämer, an economist at Commerzbank, said.

All this confirms the forecast that the European Central Bank will cut its key interest rate again as early as July, the economist added.

The German economy is heading for the doldrums, Clemens Fuest ifo President said.
The central bank had forecast the economy to contract slightly in the second quarter as factors that boosted first quarter growth fades.

Earlier this month, Bundesbank had downgraded its growth outlook for 2019 to 0.6 percent from 1.6 percent and that for next year to 1.2 percent from 1.6 percent.

In manufacturing, business climate fell once again as industrial companies' pessimism grew due primarily to shrinking order books, ifo survey revealed.

In the services, the business climate worsened, driven by noticeably less optimistic expectations. In contrast, service providers were more positive in their assessment of the current business situation.

On the other hand, business climate in trade strengthened. Companies were more satisfied with their current situation. Also, they were more confident about the coming months.

In construction, the business climate index fell, but remains at a high level. Companies' assessment of their current situation worsened and their business expectations dropped in June.

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