EU Economy
German business confidence dropped in June to lowest level since October
By Finfacts Team
Jul 25, 2014 - 3:55 PM

German business confidence dropped in June to the lowest level since October as weaker growth and rising tensions in Ukraine impact the outlook for Europe’s largest economy.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 108 from 109.7 in June, marking the third straight monthly fall.

In manufacturing the business climate index fell sharply for the third month in succession. Assessments of the current business situation were clearly less favourable. Expectations also continued to deteriorate. The export outlook fell to its lowest level for over a year, but the majority of manufacturers remained positive. Capacity utilisation rates dropped by 0.3 points to 84.0%.

In wholesaling the business climate index fell markedly. After a very strong month in June, wholesalers were no longer quite as satisfied with their current business situation. Expectations declined for the third month in succession. The business climate also clouded over considerably in retailing. Retailers’ assessments of their current business situation were no longer quite as favourable as in June. Scepticism regarding future business developments reached its highest level for over 12 months.

In construction the business climate index also fell after last month’s slight recovery. Assessments of the current business situation were somewhat less favourable than in June, but remained at a high level. Contractors were also slightly less optimistic about their six-month business outlook.

The Ifo Business Climate Indicator for the German service sector fell to 22.5 balance points in July from 25.2 points last month. Assessments of the current business situation were no longer as positive as in June. Service providers, by contrast, are slightly more optimistic about future business developments and still plan to recruit 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.