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
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.