The deterioration in Germany's business confidence, as the latest Ifo survey showed, reinforces fears of economic stagnation and a possible recession in the near term, Capital Economics Chief European Economist Jonathan Loynes said Friday.
The economist said that the disappointing Ifo survey has dealt a major blow to hopes that strong growth and higher inflation in Germany would help solve the euro-zone crisis. The data also underline the message earlier given by the ZEW and PMI surveys that growth has stalled.
Capital Economics warned that with the crisis elsewhere in the euro-zone still deepening and the global environment weakening, sentiment is likely to fall further over the coming months, pointing to outright recession.
Data from the Ifo institute today showed that the business climate indicator dropped to 105.3 in June from from 106.9 in May, hitting the lowest level since March 2010. The fall in the index was driven mainly by the weakening of the expectations component, which dropped to 97.3 from 100.8, suggesting that the economy is stagnating. The current conditions sub-index, meanwhile, edged up to 113.9 from 113.2.
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