German Business Sentiment Falls as Market Woes Cloud Outlook

German Business Confidence Falls on Growth Concerns
  • Ifo business climate index drops to 107.3 from 108.6
  • Gauges for current condition and expectations deteriorate

German business confidence fell for a second month in January in a sign that companies in Europe’s largest economy are increasingly worried about slowing global growth.

The Ifo institute’s business climate index dropped to 107.3 from a revised 108.6 in December. The median estimate in a Bloomberg survey of economists was for a decline to 108.4.

German manufacturing is increasingly at risk from a slowdown in global trade, with the weakest Chinese economic growth in more than two decades throwing markets into turmoil and the International Monetary Fund downgrading its outlook for 2016. Even so, the Bundesbank remains confident that exports will rise and predicts that low interest rates and falling unemployment continue to support domestic demand.

“Greater international economic risks, especially the uncertainty about the Chinese economy, are impairing business expectations, especially in export-dependent manufacturing,” economists at DZ Bank AG in Frankfurt led by Michael Holstein wrote in a client note ahead of the release.

The euro was little changed after the report and traded at $1.0826 at 10:20 a.m. Frankfurt time. It was up 0.3 percent on the day.

German investor confidence fell for the first time in three months in January and the benchmark DAX index has declined more than 10 percent since the beginning of December.

Manufacturers and service providers have so far shrugged off the uncertainty. While a Purchasing Managers’ Index for both industries slipped in January to the weakest level in three months, new orders increased and the labor market continued to strengthen, London-based Markit Economics said in a report on Friday.

German gross domestic product rose 1.7 percent in 2015. The Bundesbank forecast in December that the economy would expand 1.8 percent this year and 1.7 percent in 2017.

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