For a fifth consecutive month German business sentiment fell. This latest drop takes September’s figure to the lowest level seen since the beginning of 2010 and has exacerbated the nation’s recession fears.
It seems bearing the weight of the Euro-Zone crisis is beginning to take a telling toll on the currency bloc’s largest economy and German firms have reported a reduction in product demand from markets both within Europe and elsewhere.
Despite expectations for a modest rise, data released by the IFO institute has shown that its business climate index fell from 102.3 in August to 101.4 in September.
The business climate index is based on a monthly survey of roughly 7,000 firms.
In recent weeks European Central Bank President Mario Draghi delivered on his promise to do ‘whatever it takes’ to save the Euro by confirming plans to buy the bonds of the most severely indebted nations. However, whilst this may have gone a long way to restoring investor confidence in the Euro-Zone and calming financial markets it isn’t a miracle cure, as this data proves. The 17 nation currency bloc still has significant hurdles to face and German business scepticism is just one of them.
As Holger Schmieding (an economist with Berenberg investment bank) comments: ‘The drop in IFO business confidence is a potent reminder that the outlook for the German and Euro-Zone economies still hangs in the balance.’
An economist with ING Bank also went on to state that ‘Today’s IFO index shows that German companies remain sceptical about the economic impact of Mario Draghi’s magic.’ Carsten Brzeski continued; ‘Despite fears of a looming Euro-Zone break-up clearly fading away, German businesses are downscaling their expectations. The German economy could see a contraction in the third quarter.’
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