Daily Times

German business confidence deteriorated for a fifth consecutive month in April, a survey indicated on Tuesday, in a further sign that Europe’s biggest economy is losing some of its momentum.

The Munich-based Ifo economic institute said its new business climate index, which for the first time incorporated responses from the services sector, fell to 102.1 from 103.3 in March. A Reuters poll had pointed to a reading of 102.7.

“High spirits among German businesses have evaporated,” Ifo chief Clemens Fuest said. “The German economy is slowing down,” he added.

Business morale in manufacturing deteriorated for the third consecutive month but nevertheless remained at a high level, according to the survey, which is now based on the responses of some 9,000 firms.

In the service sector, the business climate index fell sharply as managers were far less optimistic about the next six months.

On the upside, business morale in construction hit a new record high as firms benefit from increased demand for real estate due to a growing population, record-low borrowing costs, rising real wages and a solid labour market.

Ifo economist Klaus Wohlrabe said the Ifo figures pointed to gross domestic product (GDP) growth of 0.4 percent in the first quarter.

“The fifth drop in a row is a sign of normalisation, we are far from a recession,” Wohlrabe told Reuters.

The Finance Ministry cautioned on Friday that growth could slow slightly in the first quarter after an expansion of 0.6 percent on the quarter in the final three months of 2017.

The German government will update its own growth forecast on Wednesday.

The International Monetary Fund last week raised its forecast for German economic growth, predicting a healthy 2.5 percent expansion this year.

Published in Daily Times, April 25th 2018.