German business confidence drops
Friday, October 21, 2011
BERLIN (AP) — A closely-watched survey shows German business confidence has fallen for the fourth month in a row but remains at relatively high levels, as Europe’s biggest economy continues to weather the turmoil from the debt crisis.
The Ifo Institute said Friday that its monthly confidence index fell to 106.4 in October from 107.4 in September. The decline was not as big as had been anticipated and the index remains above its long-run average.
The German government is forecasting growth of 2.9 percent this year, but all signs are that the export-driven economy is slowing as the debt crisis batters the other countries in the eurozone and as growth eases in key emerging markets such as China. Economy Minister Philipp Roesler on Thursday lowered the government’s 2012 growth forecast to 1 percent from 1.8 percent.
Economist Andreas Rees at Unicredit said a strong order backlog for German companies would cushion the impending slowdown.
Few economists think that Germany will sink back into recession though the European debt crisis could well alter expectations, should the eurozone not come up with a comprehensive plan that’s already seen three countries bailed out. A summit this Sunday was intended to come up with the strategy to deal with the crisis but Germany, along France, said another meeting will need to take place, by Wednesday at the latest.
Ben May, European economist at Capital Economics, said the Ifo survey was pointing to much slower growth, especially in its measures of future expectations as opposed to relatively strong present business conditions.
He said there was “nothing here to alter our view that Germany is in the midst of a sharp slowdown and that growth next year will ease to a well below consensus 0.5 percent or so.”