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German Business Sentiment Falls as Global Risks Weigh on Economy

Alessandro Speciale aspeciale

December 17, 2015 — 11:01 AM EET


  • Ifo business climate index drops to 108.7 from 109.0

  • Gauge for current conditions falls, while expectations steady


German business confidence unexpectedly declined in December in a sign that companies are concerned about the risks facing Europe’s largest economy.

The Ifo institute’s business climate index dropped to 108.7 from 109.0 in November. The median estimate in a Bloomberg survey of economists was for an unchanged reading.

The Bundesbank kept its 2016 growth projection unchanged at 1.8 percent this month, arguing that the economy is benefiting from “lively” domestic spending even as the export-oriented manufacturing sector suffers from uncertainty in emerging markets. With a renewed drop in oil prices undermining efforts by the European Central Bank to boost inflation in the euro area and a refugee crisis testing the region’s political resolve, risks to the outlook have increased.

“The economy should continue its current positive, though not breathtakingly strong, momentum next year, with possibly the biggest risks stemming from too low oil prices and the political side effects from the refugee inflow,” Carsten Brzeski, chief economist at ING-DiBa AG in Frankfurt, said in a client note before the report. “Domestic demand, and in particular private consumption, has become an important growth driver.”

A Purchasing Managers’ Index for manufacturing and services indicated the country’s private sector rounded off its best quarter in 1 1/2 years. German investor confidence improved for a second consecutive month in November in anticipation of more stimulus by the ECB and unemployment unexpectedly fell to 6.3 percent last month, the lowest since German reunification.




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