Dec. 17 (Bloomberg) -- Business confidence in Germany, Europe's largest economy, probably fell in December for the fourth month in five as the euro's appreciation to a record dimmed the outlook for exporters, a survey of economists showed.

The Ifo institute's index of business confidence may have declined to 93.9 from 94.1 in November, according to the median forecast of 44 economists surveyed by Bloomberg. That reading would be the lowest since September 2003. The report is scheduled for release at 10 a.m. in Munich.

``We can't expect much support for growth from exports, and domestic demand is too weak to compensate,'' said Juergen Michels, an economist at Citigroup Global Markets in London.

The euro's 11 percent increase against the dollar in the past six months makes exports, accounting for a third of the economy, more expensive abroad just as global economic growth is slowing and unemployment at a six-year high limits German consumer spending. Two of the nation's six leading economic institutes this month cut their 2005 growth forecast.

DaimlerChrysler AG, Volkswagen AG and other German carmakers face a ``difficult'' market next year, the VDA industry association said Dec. 10, with consumers' preoccupation with the economic outlook offsetting the attraction of new models. Deutsche Lufthansa AG, Europe's third-largest airline, last month announced the biggest decline in capacity use since September 2003 after adding more seats than it could sell.

Deteriorating Outlook

Ifo, which surveys 7,000 companies for its monthly report, will probably say that executives' assessment of current and future business conditions also deteriorated in December, economists said.

The euro reached a record $1.3469 on Dec. 7, eroding the value of sales abroad for European companies. The currency traded at $1.3287 at 5:50 p.m. in Frankfurt on Thursday.

The RWI economic institute in Essen this month reduced its 2005 growth forecast to 1.3 percent from 1.5 percent. The Kiel- based Institute for World Economics forecasts 0.8 percent, less than half the 1.7 percent predicted by the German government. The economy barely grew in the third quarter as exports shrank.

``We will have somewhat slower growth next year'' in Germany, said Martin Huefner, chief economist of HVB Group in Munich. ``If exports collapse, as they did in the third quarter, then nothing will help and growth in Germany will also collapse.''

Pressure From Trichet

European Central Bank President Jean-Claude Trichet, struggling to slow the euro's ascent, on Dec. 15 repeated that the currency's recent gains are ``unwelcome.'' Concern that the U.S. current-account deficit may be unsustainable, and that foreign investors' willingness to buy U.S. debt may dwindle, add to the chances of ``severe downward pressure'' on the dollar, the ECB said the same day.

The current-account deficit widened to a record $164.7 billion from July through September as Americans bought more imported goods, a government report showed yesterday. The gap is equivalent to 5.6 percent of the nation's $11.8 trillion economy.

The U.S. economy, the world's largest, will expand 3.5 percent next year, compared with 2.2 percent in the euro region, the International Monetary Fund forecast in September.

The ECB, which sets interest rates for the dozen countries that use the euro, has kept its main lending rate at a six-decade low of 2 percent since June last year, in part because the euro's gains slowed the region's export-led recovery. Investors pared expectations for an interest-rate increase as the euro rose against the dollar, futures trading shows.

Rate Futures

The yield on the June Euribor interest-rate future contracts was 2.27 percent at 3:17 p.m. in Frankfurt, down from 2.39 percent a month earlier. The contracts settle to the three-month euro area interbank offered rate for the euro, which has averaged 15 basis points more than the ECB's benchmark rate since the currency's launch in 1999. That rate was 2.18 percent.

An 18 percent drop in oil prices in the past two months may help bolster European consumer spending in coming months and offset a slowdown in export growth. A barrel of crude oil cost $43.80 at noon in New York yesterday, compared with a record $55.67 on Oct. 25.

``The drop in oil prices probably helped ease concern among executives in December,'' said Citigroup's Michels. ``Growth will slow in the winter months, but it's unlikely that Germany will slide into another period of stagnation.''

To contact the reporter on this story: Christian Baumgaertel in Frankfurt at cbaumgaertel@bloomberg.net.

Last Updated: December 16, 2004 19:05 EST