EU Economy
German business confidence hit by Ukraine crisis in March
By Finfacts Team
Mar 25, 2014 - 11:29 AM

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German business confidence fell for the first time in five months as companies assess the risks to business from economic sanctions against Russia after its annexation of Ukraine's Crimea province.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 110.7 in March after reaching 111.3 the prior month, the highest level since July 2011.

Assessments of the current business situation rose significantly to reach their highest level since spring 2012. Expectations for the months ahead, however, clouded over considerably. The majority of manufacturers nevertheless remain optimistic about the export outlook.

The business climate index in wholesaling fell. Wholesalers were somewhat less satisfied with their current business situation. They were also slightly less positive about their short-term business outlook. In retailing, the business climate index edged upwards. Assessments of the current business situation, which were already very good, showed significant further improvement. Retailers, by contrast, were less optimistic about future business developments.

The business climate index continued to fall in construction. Assessments of the current business situation were fractionally more favourable. The six-month business outlook, on the other hand, continued to cloud over, but remained significantly higher than the long-term average.

The Ifo Business Climate Indicator for the German service sector continued to fall in March. This was primarily due to a clear deterioration in expectations on the part of service providers, which fell below the long-term average. Assessments of the current business situation, by contrast, were considerably better than last month. Despite a loss of momentum, firms still plan to recruit small numbers of additional staff.

The Ifo Business Survey of the service sector is based on ca. 2,500 monthly survey responses from firms in key segments of the tertiary sector, especially business-oriented segments (excl. distribution, financial services, Leasing, insurance and government). The survey is conducted and calculated in the same way as the Ifo Business Survey of industry and trade. The indicator for the Business Climate in the service sector has not yet been incorporated into the Ifo Business Climate Index for industry and trade.

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