German Business Sentiment Falls as Turmoil and China Sow Concern

  • Ifo business climate index drops to 105.7 from 107.3
  • Gauge for current situation improves, expectations fall

German business confidence fell for a third month in a sign that companies in Europe’s largest economy are growing more concerned as slowing global growth roils financial markets.

The Ifo institute’s business climate index dropped to 105.7 in February from 107.3 in January. The median estimate in a Bloomberg survey of economists was for a decline to 106.8.

China’s cooling economy is weighing on global trade and hurting German exporters, with a report Tuesday showing net trade dragged on economic growth last quarter. The concern is whether that feeds through into the domestic economy, which has so far been supported by record-low unemployment and rising wages.

“The outlook for the global economy is still cloudy,” Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt AG in Dusseldorf, said ahead of Tuesday’s Ifo release. “There’s higher uncertainty.”

A measure of the current situation in Germany improved to 112.9 from 112.5, the Ifo report showed. A gauge of expectations dropped to 98.8 from a revised 102.3.

German exports dropped 0.6 percent in the final three months of 2015, the Federal Statistics Office said on Tuesday. Capital investment rose 1.5 percent and government spending climbed 1 percent, leading the 0.3 percent expansion in gross domestic product.

The nation’s economy has taken a hit from weak global demand, with the Markit Economics Purchasing Managers Index of manufacturing falling to a 15-month low in February. The rate of job creation was the slowest in almost a year.

Investor confidence slid to its lowest level since October 2014, the ZEW Center for European Economic Research in Mannheim said last week.

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